form10k_100309.htm
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 October
3, 2009
[
] 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. 001-14704
TYSON
FOODS, INC.
(Exact
Name of Registrant as specified in its Charter)
Delaware
(State
or other jurisdiction of
incorporation
or organization)
|
71-0225165
(I.R.S.
Employer Identification No.)
|
|
|
2200
Don Tyson Parkway, Springdale, Arkansas
(Address
of principal executive offices)
|
72762-6999
(Zip
Code)
|
|
|
Registrant's
telephone number, including area code:
|
(479)
290-4000
|
Securities
Registered Pursuant to Section 12(b) of the Act:
Title
of Each Class
Class
A Common Stock, Par Value $0.10
|
Name
of Each Exchange on Which Registered
New
York Stock Exchange
|
Securities
Registered Pursuant to Section 12(g) of the Act: Not Applicable
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes [X] No [ ]
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
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 whether the registrant has submitted electronically and posted on
its corporate web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months. Yes [ ] 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. [ ]
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definition of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer [X]
|
|
Accelerated
filer [ ]
|
|
Non-accelerated
filer [ ] (Do not check if a smaller reporting company)
|
|
Smaller
reporting company [ ]
|
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes [ ] No [X]
On March
28, 2009, the aggregate market value of the registrant’s Class A Common Stock,
$0.10 par value (Class A stock), and Class B Common Stock, $0.10 par value
(Class B stock), held by non-affiliates of the registrant was $2,902,509,297 and
$208,165, respectively. Class B stock is not publicly listed for trade on any
exchange or market system. However, Class B stock is convertible into Class A
stock on a share-for-share basis, so the market value was calculated based on
the market price of Class A stock.
On
October 31, 2009, there were 306,647,117 shares of the registrant's Class A
stock and 70,021,155 shares of its Class B stock outstanding.
INCORPORATION
BY REFERENCE
Portions
of the registrant's definitive Proxy Statement for the registrant's Annual
Meeting of Shareholders to be held February 5, 2010, are incorporated by
reference into Part III of this Annual Report on Form 10-K.
TABLE
OF CONTENTS
|
|
|
|
PART
I
|
|
PAGE
|
Item
1.
|
Business
|
3
|
Item
1A.
|
Risk
Factors
|
7
|
Item
1B.
|
Unresolved
Staff Comments
|
12
|
Item
2.
|
Properties
|
12
|
Item
3.
|
Legal
Proceedings
|
13
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
15
|
|
|
|
PART
II
|
Item
5.
|
Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
|
16
|
Item
6.
|
Selected
Financial Data
|
18
|
Item
7.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
19
|
Item
7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
36
|
Item
8.
|
Financial
Statements and Supplementary Data
|
38
|
Item
9.
|
Changes
in and Disagreements With Accountants on Accounting and Financial
Disclosure
|
81
|
Item
9A.
|
Controls
and Procedures
|
81
|
Item
9B.
|
Other
Information
|
81
|
|
|
|
PART
I
|
Item
10.
|
Directors,
Executive Officers and Corporate Governance
|
82
|
Item
11.
|
Executive
Compensation
|
82
|
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
82
|
Item
13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
83
|
Item
14.
|
Principal
Accounting Fees and Services
|
83
|
|
|
|
PART
IV
|
Item
15.
|
Exhibits,
Financial Statement Schedules
|
83
|
|
|
|
PART
I
ITEM
1. BUSINESS
GENERAL
Founded
in 1935, Tyson Foods, Inc. and its subsidiaries (collectively, “Company,” “we,”
“us” or “our”) are the world’s largest meat protein company and the
second-largest food production company in the Fortune 500 with one of the
most recognized brand names in the food industry. We produce, distribute and
market chicken, beef, pork, prepared foods and related allied products. Our
operations are conducted in four segments: Chicken, Beef, Pork and Prepared
Foods. Some of the key factors influencing our business are customer demand for
our products; the ability to maintain and grow relationships with customers and
introduce new and innovative products to the marketplace; accessibility of
international markets; market prices for our products; the cost of live cattle
and hogs, raw materials and grain; and operating efficiencies of our
facilities.
We
operate a fully vertically integrated poultry production process. Our integrated
operations consist of breeding stock, contract growers, feed production,
processing, further-processing, marketing and transportation of chicken and
related allied products, including animal and pet food ingredients. Through our
wholly-owned subsidiary, Cobb-Vantress, Inc. (Cobb), we are one of the leading
poultry breeding stock suppliers in the world. Investing in breeding stock
research and development allows us to breed into our flocks the characteristics
found to be most desirable.
We also
process live fed cattle and hogs and fabricate dressed beef and pork carcasses
into primal and sub-primal meat cuts, case ready beef and pork and fully-cooked
meats. In addition, we derive value from allied products such as hides and
variety meats sold to further processors and others.
We
produce a wide range of fresh, value-added, frozen and refrigerated food
products. Our products are marketed and sold primarily by our sales staff to
national and regional grocery retailers, regional grocery wholesalers, meat
distributors, warehouse club stores, military commissaries, industrial food
processing companies, national and regional chain restaurants or their
distributors, international export companies and domestic distributors who serve
restaurants, foodservice operations such as plant and school cafeterias,
convenience stores, hospitals and other vendors. Additionally, sales to the
military and a portion of sales to international markets are made through
independent brokers and trading companies.
We have
been exploring ways to commercialize our supply of poultry litter and animal
fats. In June 2007, we announced a 50/50 joint venture with Syntroleum
Corporation, called Dynamic Fuels LLC. Dynamic Fuels LLC will produce renewable
synthetic fuels targeting the renewable diesel and jet fuel markets.
Construction of production facilities is expected to continue through early
2010, with production targeted soon thereafter.
FINANCIAL
INFORMATION OF SEGMENTS
We
operate in four segments: Chicken, Beef, Pork and Prepared Foods. The
contribution of each segment to net sales and operating income (loss), and the
identifiable assets attributable to each segment, are set forth in Note 20,
“Segment Reporting” of the Notes to Consolidated Financial
Statements.
DESCRIPTION
OF SEGMENTS
Chicken: Chicken operations
include breeding and raising chickens, as well as processing live chickens into
fresh, frozen and value-added chicken products and logistics operations to move
products through the supply chain. Products are marketed domestically to food
retailers, foodservice distributors, restaurant operators and noncommercial
foodservice establishments such as schools, hotel chains, healthcare facilities,
the military and other food processors, as well as to international markets. It
also includes sales from allied products and our chicken breeding stock
subsidiary.
Beef: Beef operations include
processing live fed cattle and fabricating dressed beef carcasses into primal
and sub-primal meat cuts and case-ready products. This segment also includes
sales from allied products such as hides and variety meats, as well as logistics
operations to move products through the supply chain. Products are marketed
domestically to food retailers, foodservice distributors, restaurant operators
and noncommercial foodservice establishments such as schools, hotel chains,
healthcare facilities, the military and other food processors, as well as to
international markets. Allied products are marketed to manufacturers of
pharmaceuticals and technical products.
Pork: Pork operations include
processing live market hogs and fabricating pork carcasses into primal and
sub-primal cuts and case-ready products. This segment also includes our live
swine group, related allied product processing activities and logistics
operations to move products through the supply chain. Products are marketed
domestically to food retailers, foodservice distributors, restaurant operators
and noncommercial foodservice establishments such as schools, hotel chains,
healthcare facilities, the military and other
food
processors, as well as to international markets. We sell allied products to
pharmaceutical and technical products manufacturers, as well as a limited number
of live swine to pork processors.
Prepared Foods: Prepared Foods
operations include manufacturing and marketing frozen and refrigerated food
products, as well as logistics operations to move products through the supply
chain. Products include pepperoni, bacon, beef and pork pizza toppings, pizza
crusts, flour and corn tortilla products, appetizers, prepared meals, ethnic
foods, soups, sauces, side dishes, meat dishes and processed meats. Products are
marketed domestically to food retailers, foodservice distributors, restaurant
operators and noncommercial foodservice establishments such as schools, hotel
chains, healthcare facilities, the military and other food processors, as well
as to international markets.
RAW
MATERIALS AND SOURCES OF SUPPLY
Chicken: The primary raw
materials used in our chicken operations are corn and soybean meal used as feed
and live chickens raised primarily by independent contract growers. Our
vertically-integrated chicken process begins with the grandparent breeder flocks
and ends with broilers for processing. Breeder flocks (i.e., grandparents) are
raised to maturity in grandparent growing and laying farms where fertile eggs
are produced. Fertile eggs are incubated at the grandparent hatchery and produce
pullets (i.e., parents). Pullets are sent to breeder houses, and the resulting
eggs are sent to our hatcheries. Once chicks have hatched, they are sent to
broiler farms. There, contract growers care for and raise the chicks according
to our standards, with advice from our technical service personnel, until the
broilers reach the desired processing weight. Adult chickens are transported to
processing plants, and finished products are sent to distribution centers, then
delivered to customers.
We
operate our own feed mills to produce scientifically-formulated feeds. In fiscal
2009, corn and soybean meal were major production costs, representing roughly
45% of our cost of growing a live chicken. In addition to feed ingredients to
grow the chickens, we use cooking ingredients, packaging materials and cryogenic
agents. We believe our sources of supply for these materials are adequate for
our present needs, and we do not anticipate any difficulty in acquiring these
materials in the future. While we produce nearly all our inventory of breeder
chickens and live broilers, from time-to-time we purchase live, ice-packed or
deboned chicken to meet production requirements.
Beef: The primary raw
materials used in our beef operations are live cattle. We do not have facilities
of our own to raise cattle but have cattle buyers located throughout cattle
producing areas who visit independent feed yards and buy live cattle on the open
spot market. These buyers are trained to select high quality animals, and we
continually measure their performance. We also enter into various risk-sharing
and procurement arrangements with producers to secure a supply of livestock for
our facilities. We believe the sources of supply of live cattle are adequate for
our present needs.
Pork: The primary raw
materials used in our pork operations are live hogs. The majority of our live
hog supply is obtained through various procurement relationships with
independent producers. We also employ buyers who purchase hogs on a daily basis,
generally a few days before the animals are processed. These buyers are trained
to select high quality animals, and we continually measure their performance. We
believe the sources of supply of live hogs are adequate for our present needs.
Additionally, we raise a number of weanling swine to sell to independent
finishers and supply a minimal amount of live swine for our own processing
needs.
Prepared Foods: The primary
raw materials used in our prepared foods operations are commodity based raw
materials, including chicken, beef, pork, corn, flour and vegetables. Some of
these raw materials are provided by the Chicken, Beef and Pork segments, while
others may be purchased from numerous suppliers and manufacturers. We believe
the sources of supply of raw materials are adequate for our present
needs.
SEASONAL
DEMAND
Demand
for chicken and beef products generally increases during the spring and summer
months and generally decreases during the winter months. Pork and prepared foods
products generally experience increased demand during the winter months,
primarily due to the holiday season, while demand decreases during the spring
and summer months.
CUSTOMERS
Wal-Mart
Stores, Inc. accounted for 13.8% of our fiscal 2009 consolidated sales. Sales to
Wal-Mart Stores, Inc. were included in the Chicken, Beef, Pork and Prepared
Foods segments. Any extended discontinuance of sales to this customer could, if
not replaced, have a material impact on our operations. No other single customer
or customer group represents more than 10% of fiscal 2009 consolidated
sales.
COMPETITION
Our food
products compete with those of other national and regional food producers and
processors and certain prepared food manufacturers. Additionally, our food
products compete in markets around the world.
We seek
to achieve a leading market position for our products via our principal
marketing and competitive strategy, which includes:
|
●
|
identifying
target markets for value-added products;
|
|
●
|
concentrating
production, sales and marketing efforts to appeal to and enhance demand
from those markets; and
|
|
●
|
utilizing
our national distribution systems and customer support
services.
|
Past
efforts indicate customer demand can be increased and sustained through
application of our marketing strategy, as supported by our distribution systems.
The principal competitive elements are price, product safety and quality, brand
identification, breadth and depth of the product offering, availability of
products, customer service and credit terms.
INTERNATIONAL
We
exported to more than 90 countries in fiscal 2009. Major export markets include
Canada, Central America, China, the European Union, Japan, Mexico, the Middle
East, Russia, South Korea, Taiwan and Vietnam.
We have
the following international operations:
|
●
|
Tyson
de Mexico, a Mexican subsidiary, is a vertically-integrated poultry
production company;
|
|
●
|
Cobb-Vantress,
a chicken breeding stock subsidiary, has business interests in Argentina,
Brazil, the Dominican Republic, India, Ireland, Italy, Japan, the
Netherlands, Peru, the Philippines, Spain, Sri Lanka, the United Kingdom
and Venezuela;
|
|
●
|
Tyson
do Brazil, a Brazilian subsidiary, is a vertically-integrated poultry
production company;
|
|
●
|
Shandong
Tyson Xinchang Foods, joint ventures in China in which we have a majority
interest, is a vertically-integrated poultry production
company;
|
|
●
|
Tyson
Dalong, a joint venture in China in which we have a majority interest, is
a chicken further processing facility;
|
|
●
|
Jiangsu-Tyson,
a Chinese poultry breeding company, is building a vertically-integrated
poultry operation with production expected to begin in fiscal
2011;
|
|
●
|
Godrej
Tyson Foods, a joint venture in India in which we have a majority
interest, is a poultry processing business; and
|
|
●
|
Cactus
Argentina, a majority interest in a vertically-integrated beef operation
joint venture in Argentina; however, we do not consolidate the entity due
to the lack of controlling
interest.
|
We
continue to explore growth opportunities in foreign countries. Additional
information regarding export sales, long-lived assets located in foreign
countries and income (loss) from foreign operations is set forth in Note 20,
“Segment Reporting” of the Notes to Consolidated Financial
Statements.
RESEARCH
AND DEVELOPMENT
We
conduct continuous research and development activities to improve product
development, to automate manual processes in our processing plants and growout
operations, and to improve chicken breeding stock. In 2007, we opened the
Discovery Center, which includes 19 research kitchens and a USDA-inspected pilot
plant. The Discovery Center brings new market-leading retail and foodservice
products to the customer faster and more effectively.
ENVIRONMENTAL
REGULATION AND FOOD SAFETY
Our
facilities for processing chicken, beef, pork and prepared foods, milling feed
and housing live chickens and swine are subject to a variety of federal, state
and local environmental laws and regulations, which include provisions relating
to the discharge of materials into the environment and generally provide for
protection of the environment. We believe we are in substantial compliance with
such applicable laws and regulations and are not aware of any violations of such
laws and regulations likely to result in material penalties or material
increases in compliance costs. The cost of compliance with such laws and
regulations has not had a material adverse effect on our capital expenditures,
earnings or competitive position, and except as described below, is not
anticipated to have a material adverse effect in the future.
Congress
and the United States Environmental Protection Agency are considering various
options to control greenhouse gas emissions. It is unclear at this time when or
if such options will be finalized, or what the final form may be. Due to the
uncertainty surrounding this issue, it is premature to speculate on the specific
nature of impacts that imposition of greenhouse gas emission controls would have
on us, and whether such impacts would have a material adverse
effect.
We work
to ensure our products meet high standards of food safety and quality. In
addition to our own internal Food Safety and Quality Assurance oversight and
review, our chicken, beef, pork and prepared foods products are subject to
inspection prior to distribution, primarily by the United States Department of
Agriculture (USDA) and the United States Food and Drug Administration (FDA). We
are also participants in the United States Hazard Analysis Critical Control
Point (HACCP) program and are subject to the Sanitation Standard Operating
Procedures and the Public Health Security and Bioterrorism Preparedness and
Response Act of 2002.
EMPLOYEES
AND LABOR RELATIONS
As of
October 3, 2009, we employed approximately 117,000 employees. Approximately
100,000 employees were employed in the United States and 17,000 employees were
in foreign countries, primarily China, Mexico and Brazil. Approximately 33,000
employees in the United States were subject to collective bargaining agreements
with various labor unions, with approximately 6% of those employees included
under agreements expiring in fiscal 2010. These agreements expire over periods
throughout the next several years. Approximately 7,000 employees in foreign
countries were subject to collective bargaining agreements. We believe our
overall relations with our workforce are good.
MARKETING
AND DISTRIBUTION
Our
principal marketing objective is to be the primary provider of chicken, beef,
pork and prepared foods products for our customers and consumers. As such, we
utilize our national distribution system and customer support services to
achieve the leading market position for our products. On an ongoing basis, we
identify distinct markets and business opportunities through continuous consumer
and market research. In addition to supporting strong regional brands across
multiple protein lines, we build the Tyson brand primarily through well-defined
product-specific advertising and public relations efforts focused toward key
consumer targets with specific needs. These efforts are designed to present key
Tyson products as everyday solutions to relevant consumer problems thereby
gaining adoption into regular eating routines. Further, we use a coordinated mix
of activities designed to connect with our customers and consumers on both
rational and emotional levels. We utilize our national distribution system and
customer support services to achieve the leading market position for our
products.
We have
the ability to produce and ship fresh, frozen and refrigerated products
worldwide. Domestically, our distribution system extends to a broad network of
food distributors and is supported by our owned or leased cold storage
warehouses, public cold storage facilities and our transportation system. Our
distribution centers accumulate fresh and frozen products so we can fill and
consolidate less-than-truckload orders into full truckloads, thereby decreasing
shipping costs while increasing customer service. In addition, we provide our
customers a wide selection of products that do not require large volume orders.
Our distribution system enables us to supply large or small quantities of
products to meet customer requirements anywhere in the continental United
States. Internationally, we utilize both rail and truck refrigerated
transportation to domestic ports, where consolidations take place to transport
to foreign destinations. We use ocean and air transportation to meet the
delivery needs of our foreign customers.
PATENTS
AND TRADEMARKS
We
have filed a number of patents and trademarks relating to our
processes and products that either have been approved or are in the process of
application. Because we do a significant amount of brand name and product line
advertising to promote our products, we consider the protection of our
trademarks to be important to our marketing efforts. We also have developed
non-public proprietary information regarding our production processes and other
product-related matters. We utilize internal procedures and safeguards to
protect the confidentiality of such information and, where appropriate, seek
patent and/or trademark protection for the technology we utilize.
INDUSTRY
PRACTICES
Our
agreements with customers are generally short-term, primarily due to the nature
of our products, industry practices and fluctuations in supply, demand and price
for such products. In certain instances where we are selling further processed
products to large customers, we may enter into written agreements whereby we
will act as the exclusive or preferred supplier to the customer, with pricing
terms that are either fixed or variable. Due to volatility of the cost of raw
materials, fixed price contracts are generally limited to three months in
duration.
AVAILABILITY
OF SEC FILINGS AND CORPORATE GOVERNANCE DOCUMENTS ON INTERNET
WEBSITE
We
maintain an internet website for investors at http://ir.tyson.com. On this
website, we make available, free of charge, annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments
to any of those reports, as soon as reasonably practicable after we
electronically file such reports with, or furnish to, the Securities and
Exchange Commission. Also available on the website for investors are the
Corporate Governance Principles, Audit Committee charter, Compensation Committee
charter, Governance Committee charter, Nominating Committee charter, Code of
Conduct and Whistleblower Policy. Our corporate governance documents are
available in print, free of charge to any shareholder who requests
them.
CAUTIONARY
STATEMENTS RELEVANT TO FORWARD-LOOKING INFORMATION FOR THE PURPOSE OF "SAFE
HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
Certain
information in this report constitutes forward-looking statements. Such
forward-looking statements include, but are not limited to, current views and
estimates of future economic circumstances, industry conditions in domestic and
international markets, our performance and financial results, including, without
limitation, debt-levels, return on invested capital, value-added product growth,
capital expenditures, tax rates, access to foreign markets and dividend policy.
These forward-looking statements are subject to a number of factors and
uncertainties that could cause our actual results and experiences to differ
materially from anticipated results and expectations expressed in such
forward-looking statements. We wish to caution readers not to place undue
reliance on any forward-looking statements, which speak only as of the date
made. We undertake no obligation to publicly update any forward-looking
statements, whether as a result of new information, future events or
otherwise.
Among the
factors that may cause actual results and experiences to differ from anticipated
results and expectations expressed in such forward-looking statements are the
following: (i) the effect of, or changes in, general economic conditions; (ii)
fluctuations in the cost and availability of inputs and raw materials, such as
live cattle, live swine, feed grains (including corn and soybean meal) and
energy; (iii) market conditions for finished products, including competition
from other global and domestic food processors, supply and pricing of competing
products and alternative proteins and demand for alternative proteins; (iv)
successful rationalization of existing facilities and operating efficiencies of
the facilities; (v) risks associated with our commodity trading risk management
activities; (vi) access to foreign markets together with foreign economic
conditions, including currency fluctuations, import/export restrictions and
foreign politics; (vii) outbreak of a livestock disease (such as avian influenza
(AI) or bovine spongiform encephalopathy (BSE)), which could have an effect on
livestock we own, the availability of livestock we purchase, consumer perception
of certain protein products or our ability to access certain domestic and
foreign markets; (viii) changes in availability and relative costs of labor and
contract growers and our ability to maintain good relationships with employees,
labor unions, contract growers and independent producers providing us livestock;
(ix) issues related to food safety, including costs resulting from product
recalls, regulatory compliance and any related claims or litigation; (x) changes
in consumer preference and diets and our ability to identify and react to
consumer trends; (xi) significant marketing plan changes by large customers or
loss of one or more large customers; (xii) adverse results from litigation;
(xiii) risks associated with leverage, including cost increases due to rising
interest rates or changes in debt ratings or outlook; (xiv) compliance with and
changes to regulations and laws (both domestic and foreign), including changes
in accounting standards, tax laws, environmental laws and occupational, health
and safety laws; (xv) our ability to make effective acquisitions or joint
ventures and successfully integrate newly acquired businesses into existing
operations; (xvi) effectiveness of advertising and marketing programs; and
(xvii) those factors listed under Item 1A. “Risk Factors.”
ITEM
1A. RISK FACTORS
These
risks, which should be considered carefully with the information provided
elsewhere in this report, could materially adversely affect our business,
financial condition or results of operations. Additional risks and uncertainties
not currently known to us or that we currently deem to be immaterial also may
materially adversely affect our business, financial condition or results of
operations.
Fluctuations
in commodity prices and in the availability of raw materials, especially feed
grains, live cattle, live swine and other inputs could negatively impact our
earnings.
Our
results of operations and financial condition are dependent upon the cost and
supply of raw materials such as feed grains, live cattle, live swine, energy and
ingredients, as well as the selling prices for our products, many of which are
determined by constantly changing market forces of supply and demand over which
we have limited or no control. Corn and soybean meal are major production costs
in the poultry industry, representing roughly 45% of our cost of growing a
chicken in fiscal 2009. As a result, fluctuations in prices for these feed
ingredients, which include competing demand for corn and soybean meal for use in
the manufacture of renewable energy, can adversely affect our earnings.
Production of feed ingredients is affected by, among other things, weather
patterns throughout the world, the global level of supply inventories and demand
for grains and other feed ingredients, as well as agricultural and energy
policies of domestic and foreign governments.
We have
cattle under contract at feed yards owned by third parties; however, most
of the cattle we process are purchased from independent producers. We have
cattle buyers located throughout cattle producing areas who visit feed yards and
buy live cattle on the
open spot
market. We also enter into various risk-sharing and procurement arrangements
with producers who help secure a supply of livestock for daily start-up
operations at our facilities. The majority of our live swine supply is obtained
through various procurement arrangements with independent producers. We also
employ buyers who purchase hogs on a daily basis, generally a few days before
the animals are required for processing. In addition, we raise live swine and
sell feeder pigs to independent producers for feeding to processing weight and
have contract growers feed a minimal amount of company-owned live swine for our
own processing needs. Any decrease in the supply of cattle or swine on the spot
market could increase the price of these raw materials and further increase per
head cost of production due to lower capacity utilization, which could adversely
affect our financial results.
Market
demand and the prices we receive for our products may fluctuate due to
competition from global and domestic food producers and processors.
We face
competition from other global and domestic food producers and processors. Some
of the factors on which we compete and which may drive demand for our products
include:
|
●
|
price;
|
|
●
|
product
safety and quality;
|
|
●
|
brand
identification;
|
|
●
|
breadth
and depth of the product offering;
|
|
●
|
availability
of our products;
|
|
●
|
customer
service; and
|
|
●
|
credit
terms.
|
Demand
for our products also is affected by competitors’ promotional spending, the
effectiveness of our advertising and marketing programs and the availability or
price of competing proteins.
We
attempt to obtain prices for our products that reflect, in part, the price we
must pay for the raw materials that go into our products. If we are not able to
obtain higher prices for our products when the price we pay for raw materials
increases, we may be unable to maintain positive margins.
Outbreaks
of livestock diseases can adversely impact our ability to conduct our operations
and demand for our products.
Demand
for our products can be adversely impacted by outbreaks of livestock diseases,
which can have a significant impact on our financial results. Efforts are taken
to control disease risks by adherence to good production practices and extensive
precautionary measures designed to ensure the health of livestock. However,
outbreaks of disease and other events, which may be beyond our control, either
in our own livestock or cattle and hogs owned by independent producers who sell
livestock to us, could significantly affect demand for our products, consumer
perceptions of certain protein products, the availability of livestock for
purchase by us and our ability to conduct our operations. Moreover, the outbreak
of livestock diseases, particularly in our Chicken segment, could have a
significant effect on the livestock we own by requiring us to, among other
things, destroy any affected livestock. Furthermore, an outbreak of disease
could result in governmental restrictions on the import and export of our
products to or from our suppliers, facilities or customers. This could also
result in negative publicity that may have an adverse effect on our ability to
market our products successfully and on our financial results.
We
are subject to risks associated with our international operations, which could
negatively affect our sales to customers in foreign countries, as well as our
operations and assets in such countries.
In fiscal
2009, we exported to more than 90 countries. Major export markets include
Canada, Central America, China, the European Union, Japan, Mexico, the Middle
East, Russia, South Korea, Taiwan and Vietnam. Our export sales for fiscal 2009
totaled $2.7 billion. In addition, we had approximately $329 million of
long-lived assets located in foreign countries, primarily Brazil, China and
Mexico, at the end of fiscal 2009. In fiscal 2009, approximately 3% of the loss
from continuing operations before income taxes and minority interest was from
foreign operations.
As a
result, we are subject to various risks and uncertainties relating to
international sales and operations, including:
|
●
|
imposition
of tariffs, quotas, trade barriers and other trade protection measures
imposed by foreign countries regarding the import of poultry, beef and
pork products, in addition to import or export licensing requirements
imposed by various foreign countries;
|
|
●
|
closing
of borders by foreign countries to the import of poultry, beef and pork
products due to animal disease or other perceived health or safety
issues;
|
|
●
|
impact
of currency exchange rate fluctuations between the U.S. dollar and foreign
currencies, particularly the Canadian dollar, the Chinese renminbi, the
Mexican peso, the European euro, the British pound sterling, and the
Brazilian real;
|
|
●
|
political
and economic conditions;
|
|
●
|
difficulties
and costs associated with complying with, and enforcing remedies under, a
wide variety of complex domestic and international laws, treaties and
regulations, including, without limitation, the United States' Foreign
Corrupt Practices Act and economic and trade sanctions enforced by the
United States Department of the Treasury's Office of Foreign Assets
Control;
|
|
●
|
different
regulatory structures and unexpected changes in regulatory
environments;
|
|
●
|
tax
rates that may exceed those in the United States and earnings that may be
subject to withholding requirements and incremental taxes upon
repatriation;
|
|
●
|
potentially
negative consequences from changes in tax laws; and
|
|
●
|
distribution
costs, disruptions in shipping or reduced availability of freight
transportation.
|
Negative
consequences relating to these risks and uncertainties could jeopardize or limit
our ability to transact business in one or more of those markets where we
operate or in other developing markets and could adversely affect our financial
results.
We
depend on the availability of, and good relations with, our
employees.
We have
approximately 117,000 employees, of whom approximately 40,000 are covered by
collective bargaining agreements or are members of labor unions. Our operations
depend on the availability and relative costs of labor and maintaining good
relations with employees and the labor unions. If we fail to maintain good
relations with our employees or with the unions, we may experience labor strikes
or work stoppages, which could adversely affect our financial
results.
We
depend on contract growers and independent producers to supply us with
livestock.
We
contract primarily with independent contract growers to raise the live chickens
processed in our poultry operations. A majority of our cattle and hogs are
purchased from independent producers who sell livestock to us under marketing
contracts or on the open market. If we do not attract and maintain contracts
with growers or maintain marketing relationships with independent producers, our
production operations could be negatively affected.
If
our products become contaminated, we may be subject to product liability claims
and product recalls.
Our
products may be subject to contamination by disease-producing organisms or
pathogens, such as Listeria monocytogenes, Salmonella and generic E. coli. These
pathogens are found generally in the environment; therefore, there is a risk
they, as a result of food processing, could be present in our products. These
pathogens also can be introduced to our products as a result of improper
handling at the further processing, foodservice or consumer level. These risks
may be controlled, but may not be eliminated, by adherence to good manufacturing
practices and finished product testing. We have little, if any, control over
proper handling procedures once our products have been shipped for distribution.
Even an inadvertent shipment of contaminated products may be a violation of law
and may lead to increased risk of exposure to product liability claims, product
recalls (which may not entirely mitigate the risk of product liability claims),
increased scrutiny and penalties, including injunctive relief and plant
closings, by federal and state regulatory agencies, and adverse publicity, which
could exacerbate the associated negative consumer reaction. Any of these
occurrences may have an adverse effect on our financial results.
Our
operations are subject to general risks of litigation.
We are
involved on an on-going basis in litigation arising in the ordinary course of
business or otherwise. Trends in litigation may include class actions involving
consumers, shareholders, employees or injured persons, and claims relating to
commercial, labor, employment, antitrust, securities or environmental matters.
Litigation trends and the outcome of litigation cannot be predicted with
certainty and adverse litigation trends and outcomes could adversely affect our
financial results.
Our
level of indebtedness and the terms of our indebtedness could negatively impact
our business and liquidity position.
Our
indebtedness, including borrowings under our revolving credit facility, may
increase from time to time for various reasons, including fluctuations in
operating results, working capital needs, capital expenditures and possible
acquisitions, joint ventures or other significant initiatives. Our consolidated
indebtedness level could adversely affect our business because:
|
●
|
it
may limit or impair our ability to obtain financing in the
future;
|
|
●
|
our
credit rating could restrict or impede our ability to access capital
markets at desired rates and increase our borrowing
costs;
|
|
●
|
it
may reduce our flexibility to respond to changing business and economic
conditions or to take advantage of business opportunities that may
arise;
|
|
●
|
a
portion of our cash flow from operations must be dedicated to interest
payments on our indebtedness and is not available for other purposes;
and
|
|
●
|
it
may restrict our ability to pay
dividends.
|
Our
revolving credit facility contains affirmative and negative covenants that,
among other things, may limit or restrict our ability to: create liens and
encumbrances; incur debt; merge, dissolve, liquidate or consolidate; make
acquisitions and investments; dispose of or transfer assets; pay dividends or
make other payments in respect of our capital stock; amend material documents;
change the nature of our business; make certain payments of debt; engage in
certain transactions with affiliates; and enter into sale/leaseback or hedging
transactions, in each case, subject to certain qualifications and exceptions. If
availability under this facility is less than the greater of 15% of the
commitments and $150 million, we will be required to maintain a minimum fixed
charge coverage ratio.
Our
10.50% Senior notes due March 2014 also contain affirmative and negative
covenants that, among other things, may limit or restrict our ability to: incur
additional debt and issue preferred stock; make certain investments and
restricted payments; create liens; create restrictions on distributions from
restricted subsidiaries; engage in specified sales of assets and subsidiary
stock; enter into transactions with affiliates; enter new lines of business;
engage in consolidation, mergers and acquisitions; and engage in certain
sale/leaseback transactions.
An
impairment in the carrying value of goodwill could negatively impact our
consolidated results of operations and net worth.
Goodwill
is initially recorded at fair value and is not amortized, but is reviewed for
impairment at least annually or more frequently if impairment indicators are
present. In assessing the recoverability of goodwill, we make estimates and
assumptions about sales, operating margin growth rates and discount rates based
on our budgets, business plans, economic projections, anticipated future cash
flows and marketplace data. There are inherent uncertainties related to these
factors and management’s judgment in applying these factors. Goodwill valuations
have been calculated using an income approach based on the present value of
future cash flows of each reporting unit. Under the income approach, we are
required to make various judgmental assumptions about appropriate discount
rates. The recent disruptions in global credit and other financial markets and
deterioration of economic conditions, could, among other things, cause us to
increase the discount rate used in the goodwill valuations. We could be required
to evaluate the recoverability of goodwill prior to the annual assessment if we
experience disruptions to the business, unexpected significant declines in
operating results, divestiture of a significant component of our business or
sustained market capitalization declines. These types of events and the
resulting analyses could result in goodwill impairment charges in the future.
Impairment charges could substantially affect our financial results in the
periods of such charges. In fiscal 2009, we recorded a non-cash partial
impairment of $560 million of our beef reporting unit’s goodwill. As of October
3, 2009, we had $1.9 billion of goodwill, which represented approximately 18.1%
of total assets.
Domestic
and international government regulations could impose material
costs.
Our
operations are subject to extensive federal, state and foreign laws and
regulations by authorities that oversee food safety standards and processing,
packaging, storage, distribution, advertising, labeling and export of our
products. Our facilities for processing chicken, beef, pork, prepared foods and
milling feed and for housing live chickens and swine are subject to a variety of
international, 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 our employees. Our chicken,
beef and pork processing facilities are participants in the HACCP program and
are subject to the Public Health Security and Bioterrorism Preparedness and
Response Act of 2002. In addition, our products are subject to inspection prior
to distribution, primarily by the USDA and the FDA. Loss of or failure to obtain
necessary
permits
and registrations could delay or prevent us from meeting current product demand,
introducing new products, building new facilities or acquiring new businesses
and could adversely affect operating results. Additionally, we are routinely
subject to new or modified laws, regulations and accounting standards, such as
country of origin labeling (COOL) requirements. If we are found to be out of
compliance with applicable laws and regulations in these or other areas, we
could be subject to civil remedies, including fines, injunctions, recalls or
asset seizures, as well as potential criminal sanctions, any of which could have
an adverse effect on our financial results.
A
material acquisition, joint venture or other significant initiative could affect
our operations and financial condition.
We have
recently completed acquisitions and entered into joint venture agreements and
periodically evaluate potential acquisitions, joint ventures and other
initiatives (collectively, “transactions”), and we may seek to expand our
business through the acquisition of companies, processing plants, technologies,
products and services, which could include material transactions. A material
transaction may involve a number of risks, including:
|
●
|
failure
to realize the anticipated benefits of the transaction;
|
|
●
|
difficulty
integrating acquired businesses, technologies, operations and personnel
with our existing business;
|
|
●
|
diversion
of management attention in connection with negotiating transactions and
integrating the businesses acquired;
|
|
●
|
exposure
to unforeseen or undisclosed liabilities of acquired companies;
and
|
|
●
|
the
need to obtain additional debt or equity financing for any
transaction.
|
We may
not be able to address these risks and successfully develop these acquired
companies or businesses into profitable units. If we are unable to do this, such
expansion could adversely affect our financial results.
Market
fluctuations could negatively impact our operating results as we hedge certain
transactions.
Our
business is exposed to fluctuating market conditions. We use derivative
financial instruments to reduce our exposure to various market risks including
changes in commodity prices, interest rates and foreign exchange rates. We hold
certain positions, primarily in grain and livestock futures, that do not qualify
as hedges for financial reporting purposes. These positions are marked to fair
value, and the unrealized gains and losses are reported in earnings at each
reporting date. Therefore, losses on these contracts will adversely affect our
reported operating results. While these contracts reduce our exposure to changes
in prices for commodity products, the use of such instruments may ultimately
limit our ability to benefit from favorable commodity prices.
Deterioration
of economic conditions could negatively impact our business.
Our
business may be adversely affected by changes in national or global economic
conditions, including inflation, interest rates, availability of capital
markets, consumer spending rates, energy availability and costs (including fuel
surcharges) and the effects of governmental initiatives to manage economic
conditions. Any such changes could adversely affect the demand for our products,
or the cost and availability of our needed raw materials, cooking ingredients
and packaging materials, thereby negatively affecting our financial
results.
The
recent disruptions in global credit and other financial markets and
deterioration of economic conditions, could, among other things:
|
●
|
make
it more difficult or costly for us to obtain financing for our operations
or investments or to refinance our debt in the future;
|
|
●
|
cause
our lenders to depart from prior credit industry practice and make more
difficult or expensive the granting of any amendment of, or waivers under,
our credit agreement to the extent we may seek them in the
future;
|
|
●
|
impair
the financial condition of some of our customers and suppliers thereby
increasing customer bad debts or non-performance by
suppliers;
|
|
●
|
negatively
impact global demand for protein products, which could result in a
reduction of sales, operating income and cash flows;
|
|
●
|
decrease
the value of our investments in equity and debt securities, including our
marketable debt securities, company-owned life insurance and pension and
other postretirement plan assets;
|
|
●
|
negatively
impact our commodity risk management activities if we are required to
record additional losses related to derivative financial instruments;
or
|
|
●
|
impair
the financial viability of our
insurers.
|
Changes
in consumer preference could negatively impact our business.
The food
industry in general is subject to changing consumer trends, demands and
preferences. Trends within the food industry change often, and failure to
identify and react to changes in these trends could lead to, among other things,
reduced demand and price reductions for our products, and could have an adverse
effect on our financial results.
The
loss of one or more of our largest customers could negatively impact our
business.
Our
business could suffer significant set backs in sales and operating income if our
customers’ plans and/or markets should change significantly, or if we lost one
or more of our largest customers, including, for example, Wal-Mart Stores, Inc.,
which accounted for 13.8% of our sales in fiscal 2009. Many of our agreements
with our customers are generally short-term, primarily due to the nature of our
products, industry practice and the fluctuation in demand and price for our
products.
The
consolidation of customers could negatively impact our business.
Our
customers, such as supermarkets, warehouse clubs and food distributors, have
consolidated in recent years, and consolidation is expected to continue
throughout the United States and in other major markets. These consolidations
have produced large, sophisticated customers with increased buying power who are
more capable of operating with reduced inventories, opposing price increases,
and demanding lower pricing, increased promotional programs and specifically
tailored products. These customers also may use shelf space currently used for
our products for their own private label products. Because of these trends, our
volume growth could slow or we may need to lower prices or increase promotional
spending for our products, any of which would adversely affect our financial
results.
Extreme
factors or forces beyond our control could negatively impact our
business.
Natural
disasters, fire, bioterrorism, pandemic or extreme weather, including droughts,
floods, excessive cold or heat, hurricanes or other storms, could impair the
health or growth of livestock or interfere with our operations due to power
outages, fuel shortages, damage to our production and processing facilities or
disruption of transportation channels, among other things. Any of these factors,
as well as disruptions in our information systems, could have an adverse effect
on our financial results.
Our
renewable energy ventures and other initiatives might not be as successful as we
expect.
We have
been exploring ways to commercialize animal fats and other by-products from our
operations, as well as the poultry litter of our contract growers, to generate
energy and other value-added products. For example, in fiscal 2007, we announced
the formation of Dynamic Fuels LLC, a joint venture with Syntroleum Corporation.
We will continue to explore other ways to commercialize opportunities outside
our core business, such as renewable energy and other technologically-advanced
platforms. These initiatives might not be as financially successful as we
initially announced or would expect due to factors that include, but are not
limited to, possible discontinuance of tax credits, competing energy prices,
failure to operate at the volumes anticipated, abilities of our joint venture
partners and our limited experience in some of these new areas.
Members
of the Tyson family can exercise significant control.
Members
of the Tyson family beneficially own, in the aggregate, 99.97% of our
outstanding shares of Class B Common Stock, $0.10 par value (Class B stock) and
2.36% of our outstanding shares of Class A Common Stock, $0.10 par value
(Class A stock), giving them control of approximately 70% of the total voting
power of our outstanding voting stock. In addition, three members of the Tyson
family serve on our Board of Directors. As a result, members of the Tyson family
have the ability to exert substantial influence or actual control over our
management and affairs and over substantially all matters requiring action by
our stockholders, including amendments to our restated certificate of
incorporation and by-laws, the election and removal of directors, any proposed
merger, consolidation or sale of all or substantially all of our assets and
other corporate transactions. This concentration of ownership may also delay or
prevent a change in control otherwise favored by our other stockholders and
could depress our stock price. Additionally, as a result of the Tyson family’s
significant ownership of our outstanding voting stock, we have relied on the
“controlled company” exemption from certain corporate governance requirements of
the New York Stock Exchange. Pursuant to these exemptions, our compensation
committee, which is made up of independent directors, does not have sole
authority to determine the compensation of our executive officers, including our
chief executive officer.
ITEM
1B. UNRESOLVED STAFF COMMENTS
None
ITEM
2. PROPERTIES
We have
sales offices and production and distribution operations in the following
states: Alabama, Arizona, Arkansas, California, Georgia, Hawaii, Illinois,
Indiana, Iowa, Kansas, Kentucky, Maryland, Mississippi, Missouri, Nebraska, New
Jersey, New Mexico, New York, North Carolina, Oklahoma, Pennsylvania, South
Carolina, South Dakota, Tennessee, Texas, Virginia, Washington and Wisconsin.
Additionally, we, either directly or through our subsidiaries, have sales
offices, facilities or participate in joint venture operations in Argentina,
Brazil, Canada, China, the Dominican Republic, Hong Kong, India, Ireland, Italy,
Japan, Mexico, the Netherlands, Peru, the Philippines, Russia, South Korea,
Spain, Sri Lanka, Taiwan, the United Arab Emirates, the United Kingdom and
Venezuela.
|
|
Number
of Facilities
|
|
|
Owned
|
Leased
|
Total
|
Chicken
Segment:
|
|
|
|
|
Processing
plants
|
|
61
|
2
|
63
|
Rendering
plants
|
|
14
|
-
|
14
|
Blending
mills
|
|
2
|
-
|
2
|
Feed
mills
|
|
42
|
-
|
42
|
Broiler
hatcheries
|
|
62
|
7
|
69
|
Breeder
houses
|
|
483
|
747
|
1,230
|
Broiler
farm houses
|
|
864
|
812
|
1,676
|
Beef
Segment Production Facilities
|
|
12
|
-
|
12
|
Pork
Segment Production Facilities
|
|
9
|
-
|
9
|
Prepared
Foods Segment Processing Plants
|
|
22
|
1
|
23
|
|
|
|
|
|
Distribution
Centers
|
|
10
|
2
|
12
|
Cold
Storage Facilities
|
|
65
|
10
|
75
|
|
|
|
|
|
|
|
|
Capacity(1)
|
Fiscal
2009
|
|
|
|
per
week at
|
Average
Capacity
|
|
|
|
October
3, 2009
|
Utilization
|
Chicken
Processing Plants
|
|
|
48
million head
|
90%
|
Beef
Production Facilities
|
|
|
170,000
head
|
82%
|
Pork
Production Facilities
|
|
|
437,000
head
|
90%
|
Prepared
Foods Processing Plants
|
|
|
45
million pounds
|
82%
|
(1)
|
Capacity
based on a five day week for Chicken and Prepared Foods, while Beef and
Pork are based on a six day week.
|
Chicken: Chicken processing
plants include various phases of slaughtering, dressing, cutting, packaging,
deboning and further-processing. We also have 17 pet food operations, which are
part of the Chicken processing plants. The blending mills, feed mills and
broiler hatcheries have sufficient capacity to meet the needs of the chicken
growout operations.
Beef: Beef plants include
various phases of slaughtering live cattle and fabricating beef products. Some
also treat and tan hides. The Beef segment includes three case-ready operations
that share facilities with the Pork segment. One of the beef facilities contains
a tallow refinery. Carcass facilities reduce live cattle to dressed carcass
form. Processing facilities conduct fabricating operations to produce boxed beef
and allied products.
Pork: Pork plants include
various phases of slaughtering live hogs and fabricating pork products and
allied products. The Pork segment includes three case-ready operations that
share facilities with the Beef segment.
Prepared Foods: Prepared Foods
plants process fresh and frozen chicken, beef, pork and other raw materials into
pizza toppings, branded and processed meats, appetizers, prepared meals, ethnic
foods, soups, sauces, side dishes, pizza crusts, flour and corn tortilla
products and meat dishes.
We
believe our present facilities are generally adequate and suitable for our
current purposes; however, seasonal fluctuations in inventories and production
may occur as a reaction to market demands for certain products. We regularly
engage in construction and other capital improvement projects intended to expand
capacity and improve the efficiency of our processing and support
facilities.
ITEM
3. LEGAL PROCEEDINGS
Refer to
the discussion of our certain legal proceedings pending against us under Part
II, Item 8, Notes to Consolidated Financial Statements, Note 22:
“Contingencies,” which discussion is incorporated herein by reference. Listed
below are certain additional legal proceedings for which we are
involved.
On
October 23, 2001, a putative class action lawsuit styled R. Lynn Thompson, et
al. vs. Tyson Foods, Inc. was filed in the District Court for Mayes County,
Oklahoma by three property owners on behalf of all owners of lakefront property
on Grand Lake O’ the Cherokees. Simmons Foods, Inc. and Peterson Farms, Inc.
also are defendants. The plaintiffs allege the defendants’ operations diminished
the water quality in the lake thereby interfering with the plaintiffs’ use and
enjoyment of their properties. The plaintiffs
sought
injunctive relief and an unspecified amount of compensatory damages, punitive
damages, attorneys’ fees and costs. While the District Court certified a class,
on October 4, 2005, the Court of Civil Appeals of the State of Oklahoma
reversed, holding the plaintiffs’ claims were not suitable for disposition as a
class action. This decision was upheld by the Oklahoma Supreme Court and the
case was remanded to the District Court with instructions that the matter
proceed only on behalf of the three named plaintiffs. Plaintiffs seek injunctive
relief, restitution and compensatory and punitive damages in an unspecified
amount in excess of $10,000. We and the other defendants have denied liability
and asserted various defenses. Defendants have requested a trial date, but the
court has not yet scheduled the matter for trial.
In 2004,
representatives of our subsidiary, Tyson Fresh Meats, Inc. (“TFM”), met with the
U.S. Environmental Protection Agency (“USEPA”) staff to discuss alleged
wastewater and late report filing violations under the Clean Water Act relating
to the 2002 Second and Final Consent Decree that governed compliance
requirements for TFM’s Dakota City, Nebraska, facility. TFM vigorously disputed
these allegations. The U.S. Department of Justice (“DOJ”), on behalf of USEPA,
recently requested that TFM enter into a tolling agreement concerning possible
civil penalties and injunctive relief for Clean Water Act violations, which was
executed in July 2008, and enter into negotiations with DOJ and USEPA regarding
a potential settlement of this matter. Pursuant to negotiations with DOJ and
USEPA, a settlement in principal was reached on December 30, 2008, which would
require the payment of $2,026,500 in penalties. On August 20, 2009 a Joint
Stipulation Motion was filed in the U.S. District Court for the District of
Nebraska documenting the settlement agreement. The Court approved the settlement
on August 31, 2009. The penalties were paid by TFM on September 15, 2009, and
the matter was resolved.
On
January 9, 2003, we received a notice of liability letter from Union Pacific
Railroad Company (“Union Pacific”) relating to our alleged contributions of
waste oil to the Double Eagle Refinery Superfund Site in Oklahoma City,
Oklahoma. On August 22, 2006, the United States and the State of Oklahoma filed
a lawsuit styled United States of America, et al. v. Union Pacific Railroad Co.
in the United States District Court for the Western District of Oklahoma seeking
more than $22 million (the amount sought has subsequently increased to more than
$30 million) to remediate the Double Eagle site. Certain Tyson entities joined a
“potentially responsible parties” group on October 31, 2006. A settlement
between the “potentially responsible parties” group, the United States, and the
State of Oklahoma was reached and the Tyson entities paid $625,586 (for 135,997
alleged gallons of waste oil) into escrow towards the settlement of the matter.
In furtherance of finalizing the settlement, on June 20, 2008 the DOJ filed a
complaint styled United States of America, et al. v. Albert Investment Co., Inc.
et al. against numerous alleged responsible parties, including various Tyson
entities (the “Litigation”). A proposed Consent Decree addressing all alleged
liability of Tyson for the site was lodged on June 27, 2008. On August 15, 2008,
Union Pacific submitted to the United States its Comments and Objections to the
proposed Consent Decree. In its Comments and Objections, Union Pacific claimed
that the Tyson entities' alleged gallons of waste oil should be 160,819 rather
than the 135,997 gallons set forth in the proposed Consent Decree. On October
10, 2008, Union Pacific initiated litigation to challenge the proposed Consent
Decree by filing a motion to intervene in the Litigation, which the court
denied. Union Pacific appealed this decision to the United States Court of
Appeals for the Tenth Circuit. The "potentially responsible parties" group and
other parties filed briefs in the Tenth Circuit, and oral arguments occurred on
September 21, 2009. If the proposed Consent Decree is entered, the escrowed
amount will be paid to the United States and the State of Oklahoma.
In
November 2006, the Audit Committee of our Board of Directors engaged outside
counsel to conduct a review of certain payments that had been made by one of our
subsidiaries in Mexico, including payments to individuals employed by Mexican
governmental bodies. The payments were discontinued in November 2006. Although
the review process is ongoing, we believe the amount of these payments is
immaterial, and we do not expect any material impact to our financial
statements. We have contacted the Securities and Exchange Commission and the
U.S. Department of Justice to inform them of our review and preliminary findings
and are cooperating fully with these governmental authorities.
Since
2003, nine lawsuits have been brought against Tyson and several other poultry
companies by approximately 150 plaintiffs in Washington County, Arkansas Circuit
Court (Green v. Tyson Foods, Inc., et al., Bible v. Tyson Foods, Inc., Beal v.
Tyson Foods, Inc., et al., McWhorter v. Tyson Foods, Inc., et al., McConnell v.
Tyson Foods, Inc., et al., Carroll v. Tyson Foods, Inc., et al., Belew v. Tyson
Foods, Inc., et al., Gonzalez v. Tyson Foods, Inc., et al., and Rasco v. Tyson
Foods, Inc., et al.) alleging that the land application of poultry litter caused
arsenic and pathogenic mold and fungi contamination of the air, soil and water
in and around Prairie Grove, Arkansas. In addition to the poultry company
defendants, plaintiffs sued Alpharma, the manufacturer of a feed ingredient
containing an organic arsenic compound that has been used in the broiler
industry. Plaintiffs are seeking recovery for several types of personal
injuries, including several forms of cancer. On August 2, 2006, the Court
granted summary judgment in favor of Tyson and the other poultry company
defendants in the first case to go to trial and denied summary judgment as to
Alpharma. The case was tried against Alpharma and the jury returned a verdict in
favor of Alpharma. Plaintiffs appealed the summary judgment in favor of the
poultry company defendants and the Court stayed the remaining eight lawsuits
pending the appeal. On May 8, 2008, the Arkansas Supreme Court reversed the
summary judgment in favor of the poultry company defendants. The remanded
trial in this case against the poultry company defendants began on April 30,
2009 and on May 14, 2009, the jury returned a verdict in favor of us and the
other poultry company defendants. On July 13, 2009, plaintiffs filed a notice of
appeal to the Arkansas Supreme Court.
Other Matters: We have
approximately 117,000 employees and, at any time, have various employment
practices matters outstanding. In the aggregate, these matters are significant
to the Company, and we devote significant resources to managing employment
issues. Additionally, we are subject to other lawsuits, investigations and
claims (some of which involve substantial amounts) arising out of the conduct of
our business. While the ultimate results of these matters cannot be determined,
they are not expected to have a material adverse effect on our consolidated
results of operations or financial position.
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not
applicable.
EXECUTIVE
OFFICERS OF THE COMPANY
Our
Officers serve one year terms from the date of their election, or until their
successors are appointed and qualified. No family relationships exist among
these officers. The name, title, age and year of initial election to executive
office of our executive officers are listed below:
Name
|
Title
|
Age
|
Year
Elected
|
Richard
A. Greubel, Jr.
|
Group
Vice President and International President
|
47
|
2007
|
Craig
J. Hart
|
Senior
Vice President, Controller and Chief Accounting Officer
|
53
|
2004
|
Kenneth
J. Kimbro
|
Senior
Vice President, Chief Human Resources Officer
|
56
|
2009
|
Dennis
Leatherby
|
Executive
Vice President and Chief Financial Officer
|
49
|
1994
|
James
V. Lochner
|
Chief
Operating Officer
|
57
|
2005
|
Donnie
Smith
|
President
and Chief Executive Officer
|
50
|
2008
|
David
L. Van Bebber
|
Executive
Vice President and General Counsel
|
53
|
2008
|
Jeffrey
D. Webster
|
Group
Vice President, Renewable Products
|
48
|
2008
|
Richard
A. Greubel, Jr. was appointed Group Vice President and International
President in May 2007, after serving as Group Vice President, International
since August 2006, and President and Managing Director for Monsanto’s Brazil
business since 2001.
Craig J.
Hart was appointed Senior Vice President, Controller and Chief Accounting
Officer in September 2004 after serving as Vice President of Special Projects
since 2001. Mr. Hart was initially employed by IBP in 1978.
Kenneth J. Kimbro was appointed
Senior Vice President, Chief Human Resources Officer in 2001. Mr. Kimbro was
initially employed by IBP in 1995.
Dennis
Leatherby was appointed Executive Vice President and Chief Financial Officer in
June 2008 after serving as Senior Vice President, Finance and Treasurer since
1998. He also served as Interim Chief Financial Officer from July 2004 to June
2006. Mr. Leatherby was initially employed by the Company in 1990.
James V.
Lochner was appointed Chief Operating Officer on November 19, 2009, after
serving as Senior Group Vice President, Fresh Meats and Margin Optimization
since May 2006, Senior Group Vice President, Margin Optimization, Purchasing and
Logistics since October 2005, Group Vice President, Purchasing, Travel, and
Aviation since November 2004 and Group Vice President, Fresh Meats since 2001.
Mr. Lochner was initially employed by IBP in 1983.
Donnie
Smith was appointed President and Chief Executive Officer on November 19, 2009,
after serving as Senior Group Vice President, Poultry and Prepared Foods since
January 2009, Group Vice President of Consumer Products since January 2008,
Group Vice President of Logistics and Operations Services since April 2007,
Senior Vice President Information Systems, Purchasing and Distribution since May
2006, Senior Vice President and Chief Information Officer since November 2005,
and Senior Vice President, Supply Chain Management since October 2001. Mr. Smith
was initially employed by the Company in 1980.
David L.
Van Bebber was appointed Executive Vice President and General Counsel in May
2008, after serving as Senior Vice President and Deputy General Counsel since
September 2004 and Senior Vice President, Legal Services since November 2000.
Mr. Van Bebber was initially employed by Lane Processing in 1982. Lane
Processing was acquired by the Company in 1986.
Jeffrey
D. Webster was appointed Group Vice President, Renewable Products in November
2008, after serving as Senior Vice President, Renewable Products since April
2006, Senior Vice President, Strategy and Development since June 2005 and Vice
President, Strategy since January 2004. Mr. Webster was initially employed by
the Company in 2004.
PART
II
ITEM
5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
We have
issued and outstanding two classes of capital stock, Class A stock and Class B
stock. Holders of Class B stock may convert such stock into Class A stock on a
share-for-share basis. Holders of Class B stock are entitled to 10 votes per
share while holders of Class A stock are entitled to one vote per share on
matters submitted to shareholders for approval. As of October 31, 2009, there
were approximately 34,000 holders of record of our Class A stock and 10 holders
of record of our Class B stock, excluding holders in the security position
listings held by nominees.
DIVIDENDS
Cash
dividends cannot be paid to holders of Class B stock unless they are
simultaneously paid to holders of Class A stock. 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. We have paid
uninterrupted quarterly dividends on common stock each year since 1977 and
expect to continue our cash dividend policy during fiscal 2010. In both fiscal
2009 and 2008, the annual dividend rate for Class A stock was $0.16 per share
and the annual dividend rate for Class B stock was $0.144 per
share.
MARKET
INFORMATION
The 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. The high and low
closing sales prices of our Class A stock for each quarter of fiscal 2009 and
2008 are represented in the table below.
|
|
Fiscal
2009
|
|
|
Fiscal
2008
|
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
First
Quarter
|
|
$ |
12.87 |
|
|
$ |
4.40 |
|
|
$ |
18.53 |
|
|
$ |
14.11 |
|
Second
Quarter
|
|
|
9.93 |
|
|
|
7.59 |
|
|
|
16.95 |
|
|
|
13.26 |
|
Third
Quarter
|
|
|
13.88 |
|
|
|
9.33 |
|
|
|
19.44 |
|
|
|
13.68 |
|
Fourth
Quarter
|
|
|
13.23 |
|
|
|
10.95 |
|
|
|
17.07 |
|
|
|
12.14 |
|
ISSUER
PURCHASES OF EQUITY SECURITIES
The table
below provides information regarding our purchases of Class A stock during the
periods indicated.
Period
|
|
|
|
|
Total
Number of Shares Purchased
|
|
|
Average
Price Paid per Share
|
|
|
Total
Number of Shares Purchased as Part of Publicly Announced Plans or
Programs
|
|
|
Maximum
Number
of
Shares that May
Yet
Be Purchased
Under
the Plans or
Programs
(1)
|
|
June
28 to July 25, 2009
|
|
|
|
|
|
207,871 |
|
|
$ |
12.73 |
|
|
|
- |
|
|
|
22,474,439 |
|
July
26 to Aug. 29, 2009
|
|
|
|
|
|
172,107 |
|
|
|
11.42 |
|
|
|
- |
|
|
|
22,474,439 |
|
Aug.
30 to Oct. 3, 2009
|
|
|
|
|
|
248,339 |
|
|
|
12.44 |
|
|
|
- |
|
|
|
22,474,439 |
|
Total
|
|
|
(2 |
) |
|
|
628,317 |
|
|
$ |
12.26 |
|
|
|
- |
|
|
|
22,474,439 |
|
(1)
|
On
February 7, 2003, we announced our board of directors approved a plan to
repurchase up to 25 million shares of Class A stock from time to time in
open market or privately negotiated transactions. The plan has no fixed or
scheduled termination date.
|
(2)
|
We
purchased 628,317 shares during the period that were not made pursuant to
our previously announced stock repurchase plan, but were purchased to fund
certain company obligations under our equity compensation plans. These
transactions included 541,476 shares purchased in open market transactions
and 86,841 shares withheld to cover required tax withholdings on the
vesting of restricted stock.
|
PERFORMANCE
GRAPH
The
following graph shows a five-year comparison of cumulative total returns for our
Class A stock, the S&P 500 Index and a group of peer companies described
below.
|
Years
Ending
|
|
Base
Period
|
|
|
|
|
|
|
10/2/04
|
10/1/05
|
9/30/06
|
9/29/07
|
9/27/08
|
10/3/09
|
Tyson
Foods, Inc.
|
100
|
110.73
|
98.44
|
111.59
|
80.14
|
79.15
|
S&P
500 Index
|
100
|
112.25
|
124.37
|
144.81
|
112.99
|
105.18
|
Peer
Group
|
100
|
105.63
|
116.75
|
125.17
|
124.24
|
113.10
|
The total
cumulative return on investment (change in the year-end stock price plus
reinvested dividends), which is based on the stock price or composite index at
the end of fiscal 2004, is presented for each of the periods for the Company,
the S&P 500 Index and a peer group. The peer group includes: Campbell Soup
Company, ConAgra Foods, Inc., General Mills, Inc., H.J. Heinz Co., Hershey Foods
Corp., Hormel Foods Corp., Kellogg Co., McCormick & Co., Pilgrim’s Pride
Corporation, Sara Lee Corp. and Smithfield Foods, Inc. The graph compares the
performance of the Company with that of the S&P 500 Index and peer group,
with the investment weighted on market capitalization.
ITEM
6. SELECTED FINANCIAL DATA
FIVE-YEAR
FINANCIAL SUMMARY
in
millions, except per share and ratio data
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Summary
of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$ |
26,704 |
|
|
$ |
26,862 |
|
|
$ |
25,729 |
|
|
$ |
24,589 |
|
|
$ |
24,801 |
|
Goodwill
impairment
|
|
|
560 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Operating
income (loss)
|
|
|
(215 |
) |
|
|
331 |
|
|
|
613 |
|
|
|
(50 |
) |
|
|
655 |
|
Net
interest expense
|
|
|
293 |
|
|
|
206 |
|
|
|
224 |
|
|
|
238 |
|
|
|
227 |
|
Income
(loss) from continuing operations
|
|
|
(536 |
) |
|
|
86 |
|
|
|
268 |
|
|
|
(174 |
) |
|
|
314 |
|
Income
(loss) from discontinued operation
|
|
|
(1 |
) |
|
|
- |
|
|
|
- |
|
|
|
(17 |
) |
|
|
58 |
|
Cumulative
effect of change in accounting principle
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(5 |
) |
|
|
- |
|
Net
income (loss)
|
|
|
(537 |
) |
|
|
86 |
|
|
|
268 |
|
|
|
(196 |
) |
|
|
372 |
|
Diluted
earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
|
(1.44 |
) |
|
|
0.24 |
|
|
|
0.75 |
|
|
|
(0.51 |
) |
|
|
0.88 |
|
Income
(loss) from discontinued operation
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(0.05 |
) |
|
|
0.16 |
|
Cumulative
effect of change in accounting principle
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(0.02 |
) |
|
|
- |
|
Net
income (loss)
|
|
|
(1.44 |
) |
|
|
0.24 |
|
|
|
0.75 |
|
|
|
(0.58 |
) |
|
|
1.04 |
|
Dividends
per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A
|
|
|
0.160 |
|
|
|
0.160 |
|
|
|
0.160 |
|
|
|
0.160 |
|
|
|
0.160 |
|
Class
B
|
|
|
0.144 |
|
|
|
0.144 |
|
|
|
0.144 |
|
|
|
0.144 |
|
|
|
0.144 |
|
Balance
Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
10,595 |
|
|
$ |
10,850 |
|
|
$ |
10,227 |
|
|
$ |
11,121 |
|
|
$ |
10,504 |
|
Total
debt
|
|
|
3,552 |
|
|
|
2,896 |
|
|
|
2,779 |
|
|
|
3,979 |
|
|
|
2,995 |
|
Shareholders'
equity
|
|
|
4,352 |
|
|
|
5,014 |
|
|
|
4,731 |
|
|
|
4,440 |
|
|
|
4,671 |
|
Other
Key Financial Measures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
$ |
496 |
|
|
$ |
493 |
|
|
$ |
514 |
|
|
$ |
517 |
|
|
$ |
501 |
|
Capital
expenditures
|
|
|
368 |
|
|
|
425 |
|
|
|
285 |
|
|
|
531 |
|
|
|
571 |
|
Return
on invested capital
|
|
|
(2.7 |
)% |
|
|
4.3 |
% |
|
|
7.7 |
% |
|
|
(0.6 |
)% |
|
|
8.6 |
% |
Effective
tax rate
|
|
|
(2.7 |
)% |
|
|
44.6 |
% |
|
|
34.6 |
% |
|
|
35.0 |
% |
|
|
28.7 |
% |
Total
debt to capitalization
|
|
|
44.9 |
% |
|
|
36.6 |
% |
|
|
37.0 |
% |
|
|
47.3 |
% |
|
|
39.1 |
% |
Book
value per share
|
|
$ |
11.56 |
|
|
$ |
13.28 |
|
|
$ |
13.31 |
|
|
$ |
12.51 |
|
|
$ |
13.19 |
|
Closing
stock price high
|
|
|
13.88 |
|
|
|
19.44 |
|
|
|
24.08 |
|
|
|
18.70 |
|
|
|
19.47 |
|
Closing
stock price low
|
|
|
4.40 |
|
|
|
12.14 |
|
|
|
14.20 |
|
|
|
12.92 |
|
|
|
14.12 |
|
Notes to
Five-Year Financial Summary
a.
|
Fiscal
2009 was a 53-week year, while the other years presented were 52-week
years.
|
b.
|
Fiscal
2009 included a $560 million non-tax deductible charge related to Beef
segment goodwill impairment and a $15 million pretax charge related to
closing a prepared foods plant.
|
c.
|
Fiscal
2008 included $76 million of pretax charges related to: restructuring a
beef operation; closing a poultry plant; asset impairments for packaging
equipment, intangible assets, unimproved real property and software; flood
damage; and severance charges. Additionally, fiscal 2008 included an $18
million non-operating gain related to the sale of an
investment.
|
d.
|
Fiscal
2007 included tax expense of $17 million related to a fixed asset tax cost
correction, primarily related to a fixed asset system conversion in
1999.
|
e.
|
Fiscal
2006 included $63 million of pretax charges primarily related to closing
one poultry plant, two beef plants and two prepared foods
plants.
|
f.
|
Fiscal
2005 included $33 million of pretax charges related to a legal settlement
involving our live swine operations, a non-recurring income tax net
benefit of $15 million including benefit from the reversal of certain
income tax reserves, partially offset by an income tax charge related to
the one-time repatriation of foreign income under the American Jobs
Creation Act and $14 million of pretax charges primarily related to
closing two poultry plants and one prepared foods plant. Additionally, the
effective tax rate was affected by the federal income tax effect of the
Medicare Part D subsidy in fiscal 2005 of $55 million because this amount
was not subject to federal income tax.
|
g.
|
Return
on invested capital is calculated by dividing operating income (loss) by
the sum of the average of beginning and ending total debt and
shareholders’ equity.
|
h.
|
The
2006 total debt to capitalization ratio is not adjusted for the $750
million short-term investment we had on deposit at September 30, 2006.
When adjusted for the $750 million short-term investment, the debt to
capitalization ratio was 42.1%.
|
i.
|
In
March 2009, we completed the sale of the beef processing, cattle feed yard
and fertilizer assets of three of our Alberta, Canada subsidiaries
(collectively, Lakeside). Lakeside was reported as a discontinued
operation for all periods
presented.
|
ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
DESCRIPTION
OF THE COMPANY
We are
the world’s largest meat protein company and the second-largest food production
company in the Fortune
500 with one of the most recognized brand names in the food industry. We
produce, distribute and market chicken, beef, pork, prepared foods and related
allied products. Our operations are conducted in four segments: Chicken, Beef,
Pork and Prepared Foods. Some of the key factors influencing our business are
customer demand for our products; the ability to maintain and grow relationships
with customers and introduce new and innovative products to the marketplace;
accessibility of international markets; market prices for our products; the cost
of live cattle and hogs, raw materials and grain; and operating efficiencies of
our facilities.
OVERVIEW
|
●
|
Chicken
Segment – Fiscal 2009 operating results were negatively impacted in the
first half of fiscal 2009 by high grain costs and net losses on our
commodity risk management activities related to grain and energy
purchases. The second half of fiscal 2009 benefited as we had worked
through the majority of our long grain positions, had more stable grain
prices and made several operational improvements. Operating margins in the
first half of fiscal 2009 were negative 7.2%, while the second half
improved to positive 3.5%.
|
|
●
|
Beef
Segment – Fiscal 2009 operating loss was $346 million, which included a
$560 million non-cash goodwill impairment. Excluding the
goodwill impairment charge, operating results doubled as compared to
fiscal 2008. We sustained our operational improvements made in fiscal 2008
and continue to have strong performance, which shows in our fiscal 2009
operating results.
|
|
|
●
|
Beef
Goodwill Impairment – We perform our annual goodwill impairment test on
the first day of the fourth quarter. We estimate the fair value
of our reporting units using a discounted cash flow analysis. This
analysis requires us to make various judgmental estimates and assumptions
about sales, operating margins, growth rates and discount factors. The
recent disruptions in global credit and other financial markets and
deterioration of economic conditions led to an increase in our discount
rate. The discount rate used in our annual goodwill impairment test
increased to 10.1% in fiscal 2009 from 9.3% in fiscal 2008. There were no
significant changes in the other key estimates and
assumptions. The increased discount rate resulted in the
non-cash partial impairment of our beef reporting unit's goodwill. The
impairment has no impact on management’s estimates of the Beef segment’s
long-term profitability or value.
|
|
●
|
Pork
Segment – While our operating income was down as compared to the record
year we had in fiscal 2008, we still had solid operating earnings of $160
million, or 4.7%, with strong demand for our products and adequate
supplies of hogs.
|
|
●
|
Prepared
Foods Segment – In fiscal 2009, we had improvements in our sales volumes,
which led to operating margins of 4.7%. In addition, we made several
operational improvements that allow us to run our plants more
efficiently.
|
|
●
|
Liquidity
– In March 2009, we replaced our then existing $1.0 billion revolving
credit facility set to expire in fiscal 2010 with a new $1.0 billion
revolving credit facility which expires in March 2012. In addition, we
issued $810 million of senior notes. In conjunction with these
transactions, we paid down and terminated our accounts receivable
securitization agreement. These transactions, as well as a significant
decrease in our working capital needs, helped to strengthen our liquidity
position. At October 3, 2009, we had nearly $1.2 billion in total cash
(including restricted cash), as well as $733 million available for
borrowing under our revolving credit facility.
|
|
●
|
Acquisitions
–
|
|
|
●
|
In
October 2008, we completed the acquisition of three vertically-integrated
poultry companies in southern Brazil.
|
|
|
●
|
In
August 2009, we acquired 60% equity interest in a joint venture with a
vertically-integrated poultry operation in eastern
China.
|
|
●
|
In
March 2009, we completed the sale of the beef processing, cattle feed yard
and fertilizer assets of three of our Alberta, Canada subsidiaries
(collectively, Lakeside) to XL Foods Inc., a Canadian-owned beef
processing business, and an entity affiliated with XL Foods. We received
total consideration of $145 million, which included cash received at
closing, collateralized notes receivable and XL Foods Preferred
Stock.
|
|
●
|
Our
accounting cycle resulted in a 53-week year for fiscal 2009 and a 52-week
year for both fiscal 2008 and
2007.
|
|
|
in
millions, except per share data
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Net
income (loss)
|
|
$ |
(537 |
) |
|
$ |
86 |
|
|
$ |
268 |
|
Net
income (loss) per diluted share
|
|
|
(1.44 |
) |
|
|
0.24 |
|
|
|
0.75 |
|
|
2009 – Net loss includes
the following items:
|
|
●
|
$560
million non-cash, non-tax deductible charge related to a goodwill
impairment in our Beef segment; and
|
|
|
●
|
$15
million charge related to the closing of our Ponca City, Oklahoma,
processed meats plant.
|
|
|
2008 – Net income
includes the following items:
|
|
●
|
$33
million of charges related to asset impairments, including packaging
equipment, intangible assets, unimproved real property and
software;
|
|
|
●
|
$17
million charge related to restructuring our Emporia, Kansas, beef
operation;
|
|
|
●
|
$13
million charge related to closing our Wilkesboro, North Carolina, Cooked
Products poultry plant;
|
|
|
●
|
$13
million of charges related to flood damage at our Jefferson, Wisconsin,
plant and severance charges related to the FAST initiative;
and
|
|
|
●
|
$18
million non-operating gain related to sale of an
investment.
|
|
|
2007 – Net income
includes the following item:
|
|
●
|
$17
million of tax expense related to a fixed asset tax cost correction,
primarily related to a fixed asset system conversion in
1999.
|
|
FISCAL
2010 OUTLOOK
Segments:
|
Chicken – At the
end of fiscal 2009, industry pullet placements were down 5-6% as a result
of weaker demand. However, we expect demand will improve as we get further
into fiscal 2010, and we expect the pricing environment to improve aided
by cold storage inventories which are down relative to the levels we have
seen over the last several years. We also currently expect to see grain
costs down as compared to fiscal 2009. Additionally, we will continue to
focus on making operational improvements to help maximize our
margins.
|
Beef – While we
expect a reduction in cattle supplies of 1-2% in fiscal 2010, we do not
expect a significant change in the fundamentals of our Beef business as it
relates to fiscal 2009. We expect adequate supplies to operate our plants.
We will manage our spreads by maximizing our revenues through product mix,
minimizing our operating costs, while keeping our focus on quality and
customer service.
|
Pork – We
expect to see a gradual decline in hog supplies through the first half of
fiscal 2010, which will accelerate into the second half of fiscal 2010,
resulting in industry slaughter slightly higher than 2007 (or roughly 4%
less than fiscal 2009). However, we still believe we will have adequate
supplies in the regions in which we operate. We will manage our spreads by
continuing to control our costs and maximizing our
revenues.
|
Prepared Foods
– Raw material costs will likely increase in fiscal 2010, but we have made
some changes in our sales contracts that move us further away from fixed
price contracts toward formula pricing, which will better enable us to
absorb rising raw material costs. With the changes we have made with our
sales contracts and the operational efficiencies we made during fiscal
2009, we expect strong results in fiscal
2010.
|
SUMMARY
OF RESULTS – CONTINUING OPERATIONS
Sales
|
|
in
millions
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Sales
|
|
$ |
26,704 |
|
|
$ |
26,862 |
|
|
$ |
25,729 |
|
Change
in sales volume
|
|
|
4.4 |
% |
|
|
(0.7 |
)% |
|
|
|
|
Change
in average sales price
|
|
|
(4.8 |
)% |
|
|
5.1 |
% |
|
|
|
|
Sales
growth (decline)
|
|
|
(0.6 |
)% |
|
|
4.4 |
% |
|
|
|
|
|
2009
vs. 2008 –
|
|
●
|
Average Sales
Price - The decline in sales was largely due to a reduction in
average sales prices, which accounted for a decrease of approximately $1.2
billion. While all segments had a reduction in average sales prices, the
majority of the decrease was driven by the Beef and Pork
segments.
|
|
●
|
Sales Volume -
Sales were positively impacted by an increase in sales volume, which
accounted for an increase of approximately $1.0 billion. This was
primarily due to an extra week in fiscal 2009, increased sales volume in
our Chicken segment, which was driven by inventory reductions, and sales
volume related to recent acquisitions.
|
|
2008 vs. 2007 –
|
|
●
|
Average Sales Price
- The improvement in sales was largely due to improved average
sales prices, which accounted for an increase of approximately $1.5
billion. While all segments had improved average sales prices, the
majority of the increase was driven by the Chicken and Beef
segments.
|
|
●
|
Sales Volume -
Sales were negatively impacted by a decrease in sales volume, which
accounted for a decrease of approximately $318 million. This was primarily
due to a decrease in Beef volume and the sale of two poultry production
facilities in fiscal 2007, partially offset by an increase in Pork
volume.
|
Cost
of Sales
|
|
in
millions
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Cost
of sales
|
|
$ |
25,501 |
|
|
$ |
25,616 |
|
|
$ |
24,300 |
|
Gross
margin
|
|
$ |
1,203 |
|
|
$ |
1,246 |
|
|
$ |
1,429 |
|
Cost
of sales as a percentage of sales
|
|
|
95.5 |
% |
|
|
95.4 |
% |
|
|
94.4 |
% |
|
2009
vs. 2008 –
|
|
●
|
Cost
of sales decreased $115 million. Cost per pound contributed to a $1.1
billion decrease, offset partially by an increase in sales volume
increasing cost of sales $987 million.
|
|
|
●
|
Increase
due to net losses of $257 million in fiscal 2009, as compared to net gains
of $206 million in fiscal 2008, from our commodity risk management
activities related to grain and energy purchases, which exclude
the effect from related physical purchase transactions which impact
current and future period operating results.
|
|
|
●
|
Increase
due to sales volumes, which included an extra week in fiscal 2009, as well
as increased sales volume in our Chicken segment, which was driven by
inventory reductions and sales volume related to recent
acquisitions.
|
|
|
●
|
Decrease
in average domestic live cattle and hog costs of approximately $1.2
billion.
|
|
2008
vs. 2007 –
|
|
●
|
Cost
of sales increased $1.3 billion. Cost per pound contributed to a $1.6
billion increase, offset partially by a decrease in sales volume reducing
cost of sales $323 million.
|
|
|
●
|
Increase
of over $1.0 billion in costs in the Chicken segment, which included
increased input costs of approximately $900 million, including grain
costs, other feed ingredient costs and cooking ingredients. Plant costs,
including labor and logistics, increased by approximately $200 million.
These increases were partially offset by increased net gains of $127
million from our commodity risk management activities related to grain
purchases, which exclude the impact from related physical purchase
transactions which impact current and future period operating
results.
|
|
|
●
|
Increase
in average domestic live cattle costs of approximately $271
million.
|
|
|
●
|
Increase
in operating costs in the Beef and Pork segments of approximately $180
million.
|
|
|
●
|
Decrease
due to sales volume included lower Beef and Chicken sales volume,
partially offset by higher Pork sales volume.
|
|
|
●
|
Decrease
due to net gains of $173 million from our commodity risk management
activities related to forward futures contracts for live cattle and hog
purchases as compared to the same period of fiscal 2007. These amounts
exclude the impact from related physical purchase transactions, which
impact future period operating results.
|
|
|
●
|
Decrease
in average live hog costs of approximately $117
million.
|
Selling,
General and Administrative
|
|
in
millions
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Selling,
general and administrative
|
|
$ |
841 |
|
|
$ |
879 |
|
|
$ |
814 |
|
As
a percentage of sales
|
|
|
3.1 |
% |
|
|
3.3 |
% |
|
|
3.2 |
% |
|
2009
vs. 2008 –
|
|
●
|
Decrease
of $33 million related to advertising and sales
promotions.
|
|
●
|
Decrease
of $11 million related to the change in investment returns on
company-owned life insurance, which is used to fund non-qualified
retirement plans.
|
|
●
|
Other
reductions include decreases in our payroll-related expenses and
professional fees.
|
|
●
|
Increase
of $20 million due to our newly acquired foreign
operations.
|
|
2008
vs. 2007 –
|
|
●
|
Increase
of $29 million related to unfavorable investment returns on company-owned
life insurance, which is used to fund non-qualified retirement
plans.
|
|
●
|
Increase
of $16 million related to advertising and sales
promotions.
|
|
●
|
Increase
of $14 million due to a favorable actuarial adjustment related to retiree
healthcare plan recorded in fiscal 2007.
|
|
●
|
Increase
of $9 million due to a gain recorded in fiscal 2007 on the disposition of
an aircraft.
|
Goodwill
Impairment
|
|
in
millions
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
$ |
560 |
|
|
$ |
- |
|
|
$ |
- |
|
|
2009 – We perform our
annual goodwill impairment test on the first day of the fourth
quarter. We estimate the fair value of our reporting units
using a discounted cash flow analysis. This analysis requires us to make
various judgmental estimates and assumptions about sales, operating
margins, growth rates and discount factors. The recent disruptions in
global credit and other financial markets and deterioration of economic
conditions led to an increase in our discount rate. The discount rate used
in our annual goodwill impairment test increased to 10.1% in fiscal 2009
from 9.3% in fiscal 2008. There were no significant changes in the other
key estimates and assumptions. The increased discount rate
resulted in the non-cash partial impairment of our beef reporting unit's
goodwill. The impairment has no impact on managements' estimates of the
Beef segment’s long-term profitability or
value.
|
Other
Charges
|
|
in
millions
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
$ |
17 |
|
|
$ |
36 |
|
|
$ |
2 |
|
|
2009 – Included $15
million charge related to closing our Ponca City, Oklahoma, processed
meats plant.
|
|
2008
–
|
|
●
|
Included
$17 million charge related to restructuring our Emporia, Kansas, beef
operation.
|
|
●
|
Included
$13 million charge related to closing our Wilkesboro, North Carolina,
Cooked Products poultry plant.
|
|
●
|
Included
$6 million of severance charges related to the FAST
initiative.
|
Interest
Income
|
|
in
millions
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
$ |
17 |
|
|
$ |
9 |
|
|
$ |
8 |
|
|
2009 – The increase is
due to the increase in our cash
balance.
|
Interest
Expense
|
|
in
millions
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Cash
interest expense
|
|
$ |
273 |
|
|
$ |
214 |
|
|
$ |
229 |
|
Non-cash interest expense
|
|
|
37 |
|
|
|
1 |
|
|
|
3 |
|
Total
Interest Expense
|
|
$ |
310 |
|
|
$ |
215 |
|
|
$ |
232 |
|
|
2009 vs. 2008 –
|
|
●
|
Cash
interest expense includes interest expense related to the coupon rates for
senior notes, commitment/letter of credit fees incurred on our revolving
credit facilities, as well as other miscellaneous recurring cash payments.
The increase was due primarily to higher average weekly indebtedness of
approximately 13%. We also had an increase in the overall average
borrowing rates.
|
|
●
|
Non-cash
interest expense primarily includes interest related to the amortization
of debt issuance costs and discounts/premiums on note issuances. The
increase was primarily due to debt issuance costs incurred on the new
credit facility in fiscal 2009, the 10.5% Notes due March 2014 (2014
Notes) issued in fiscal 2009 and amendment fees paid in December 2008 on
our then existing credit agreements. In addition, we had an increase due
to the accretion of the debt discount on the 2014 Notes. Non-cash interest
expense also includes an unrealized loss on our interest rate swap and the
gain/loss on bond buybacks.
|
|
2008 vs. 2007 – The
reduction in cash interest expense was due to a lower average borrowing
rate, as well as lower average weekly indebtedness of approximately
2%.
|
Other
(Income) Expense, net
|
|
in
millions
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
$ |
18 |
|
|
$ |
(29 |
) |
|
$ |
(21 |
) |
|
2009 – Included $24
million in foreign currency exchange loss.
|
|
2008 – Included $18
million non-operating gain related to the sale of an
investment.
|
|
2007 – Included $14
million in foreign currency exchange
gain.
|
Effective
Tax Rate
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
(2.7 |
)% |
|
|
44.6 |
% |
|
|
34.6 |
% |
|
2009
–
|
|
●
|
Reduced
the effective tax rate 37.2% due to impairment of goodwill, which is not
deductible for income tax purposes.
|
|
●
|
Reduced
the effective tax rate 3.9% due to increase in foreign valuation
allowances.
|
|
●
|
Increased
the effective tax rate 2.3% due to general business
credits.
|
|
●
|
Increased
the effective tax rate 1.8% due to tax planning in foreign
jurisdictions.
|
|
2008
–
|
|
●
|
Increased
the effective tax rate 5.0% due to increase in state valuation
allowances.
|
|
●
|
Increased
the effective tax rate 4.4% due to increase in unrecognized tax
benefits.
|
|
●
|
Increased
the effective tax rate 3.8% due to net negative returns on company-owned
life insurance policies, which is not deductible for federal income tax
purposes.
|
|
●
|
Reduced
the effective tax rate 3.8% due to general business
credits.
|
|
2007
–
|
|
●
|
Increased
the effective tax rate 4.2% due to a fixed asset tax cost correction,
primarily related to a fixed asset system conversion in
1999.
|
|
●
|
Increased
the effective tax rate 3.2% due to the federal income tax effect of the
reductions in estimated Medicare Part D subsidy in fiscal 2007, which is
not deductible for federal income tax purposes.
|
|
●
|
Reduced
the effective tax rate 4.6% due to the reduction of income tax reserves
based on favorable settlement of disputed
matters.
|
SEGMENT
RESULTS
We
operate in four segments: Chicken, Beef, Pork and Prepared Foods. The following
table is a summary of sales and operating income (loss), which is how we measure
segment income (loss). Segment results exclude the results of our discontinued
operation, Lakeside.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in
millions
|
|
|
|
Sales
|
|
|
Operating
Income (Loss)
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Chicken
|
|
$ |
9,660 |
|
|
$ |
8,900 |
|
|
$ |
8,210 |
|
|
$ |
(157 |
) |
|
$ |
(118 |
) |
|
$ |
325 |
|
Beef
|
|
|
10,782 |
|
|
|
11,664 |
|
|
|
11,540 |
|
|
|
(346 |
) |
|
|
106 |
|
|
|
51 |
|
Pork
|
|
|
3,426 |
|
|
|
3,587 |
|
|
|
3,314 |
|
|
|
160 |
|
|
|
280 |
|
|
|
145 |
|
Prepared
Foods
|
|
|
2,836 |
|
|
|
2,711 |
|
|
|
2,665 |
|
|
|
133 |
|
|
|
63 |
|
|
|
92 |
|
Other
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(5 |
) |
|
|
- |
|
|
|
- |
|
Total
|
|
$ |
26,704 |
|
|
$ |
26,862 |
|
|
$ |
25,729 |
|
|
$ |
(215 |
) |
|
$ |
331 |
|
|
$ |
613 |
|
Chicken
Segment Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in
millions
|
|
|
|
2009
|
|
|
2008
|
|
|
Change
2009 vs. 2008
|
|
|
2007
|
|
|
Change
2008 vs. 2007
|
|
Sales
|
|
$ |
9,660 |
|
|
$ |
8,900 |
|
|
$ |
760 |
|
|
$ |
8,210 |
|
|
$ |
690 |
|
Sales
Volume Change
|
|
|
|
|
|
|
|
|
|
|
8.8 |
% |
|
|
|
|
|
|
(0.4 |
)% |
Average
Sales Price Change
|
|
|
|
|
|
|
|
|
|
|
(0.2 |
)% |
|
|
|
|
|
|
8.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Income (Loss)
|
|
$ |
(157 |
) |
|
$ |
(118 |
) |
|
$ |
(39 |
) |
|
$ |
325 |
|
|
$ |
(443 |
) |
Operating
Margin
|
|
|
(1.6 |
)% |
|
|
(1.3 |
)% |
|
|
|
|
|
|
4.0 |
% |
|
|
|
|
|
2008 – Operating loss
included $26 million of charges related to: plant closings; impairments of
unimproved real property and software; and severance.
|
|
2007 – Operating income
included a $10 million gain on the sale of two poultry plants and related
support facilities.
|
|
2009
vs. 2008 –
|
|
●
|
Sales Volume – The increase in sales
volume for fiscal 2009 was due to the extra week in fiscal 2009, as well
as inventory reductions and sales volume related to recent
acquisitions.
|
|
●
|
Average Sales Price
– The inventory
reductions and recent acquisitions lowered the average sales price, as
most of the inventory reduction related to commodity products shipped
internationally and sales volume from recent acquisitions was on lower
priced products.
|
|
●
|
Operating Loss
–
|
|
|
●
|
Operational
Improvements – Operating results were positively impacted by operational
improvements, which included: yield, mix and live production performance
improvements; additional processing flexibility; and reduced interplant
product movement.
|
|
|
●
|
Derivative
Activities – Operating results included the following amounts for
commodity risk management activities related to grain and energy
purchases. These amounts exclude the impact from related physical purchase
transactions, which impact current and future period operating
results.
|
2009
– Loss
|
$(257)
million
|
2008
– Income
|
206
million
|
Decline
in operating results
|
$(463)
million
|
|
|
●
|
SG&A
Expenses – We reduced our selling, general and administrative expenses
during fiscal 2009 by approximately $37 million.
|
|
|
●
|
Grain
Costs – Operating results were positively impacted in fiscal 2009 by a
decrease in grain costs of $28 million.
|
|
|
|
2008
vs. 2007 –
|
|
●
|
Sales and Operating Income
(Loss) – Sales increased as a result of an increase in average
sales prices, partially offset by a decrease in sales volume due to the
sale of two poultry plants in fiscal 2007. Operating results were
adversely impacted by increased input costs of approximately $900 million,
including grain costs, other feed ingredient costs and cooking
ingredients. Plant costs, including labor and logistics, increased by
approximately $200 million. This was partially offset by increased net
gains of $127 million from our commodity trading risk management
activities related to grain purchases, which exclude the impact from
related physical purchase transactions which impact current and future
period operating results. Operating results were also negatively impacted
by increased selling, general and administrative expenses of $43
million.
|
Beef
Segment Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in
millions
|
|
|
|
2009
|
|
|
2008
|
|
|
Change
2009 vs. 2008
|
|
|
2007
|
|
|
Change
2008 vs. 2007
|
|
Sales
|
|
$ |
10,782 |
|
|
$ |
11,664 |
|
|
$ |
(882 |
) |
|
$ |
11,540 |
|
|
$ |
124 |
|
Sales
Volume Change
|
|
|
|
|
|
|
|
|
|
|
0.5 |
% |
|
|
|
|
|
|
(4.6 |
)% |
Average
Sales Price Change
|
|
|
|
|
|
|
|
|
|
|
(8.0 |
)% |
|
|
|
|
|
|
5.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Income (Loss)
|
|
$ |
(346 |
) |
|
$ |
106 |
|
|
$ |
(452 |
) |
|
$ |
51 |
|
|
$ |
55 |
|
Operating
Margin
|
|
|
(3.2 |
)% |
|
|
0.9 |
% |
|
|
|
|
|
|
0.4 |
% |
|
|
|
|
|
2009 – Operating loss
included a $560 million non-cash charge related to the partial impairment
of goodwill.
|
|
2008 – Operating income
included $35 million of charges related to: plant restructuring,
impairments of packaging equipment and intangible assets, and
severance.
|
|
2009
vs. 2008 –
|
|
●
|
Sales
and Operating Income (Loss) –
|
|
|
●
|
While
our average sales prices have decreased as compared to fiscal 2008, we
have still maintained a margin as the average live costs decreased in line
with the drop in our average sales price.
|
|
|
●
|
Derivative
Activities – Operating results included the following amounts for
commodity risk management activities related to forward futures contracts
for live cattle. These amounts exclude the impact from related physical
sale and purchase transactions, which impact current and future period
operating results.
|
2009
– Income
|
$102
million
|
2008
– Income
|
53
million
|
Improvement
in operating results
|
$49
million
|
|
2008
vs. 2007 –
|
|
●
|
Sales and Operating Income –
Sales and operating income were impacted positively by higher
average sales prices and improved operational efficiencies, partially
offset by decreased sales volume due primarily to closure of the Emporia,
Kansas, slaughter operation. Operating results were also negatively
impacted by higher operating costs. Fiscal 2008 operating results include
realized and unrealized net gains of $53 million from our commodity risk
management activities related to forward futures contracts for live
cattle, excluding the related impact from the physical sale and purchase
transactions, compared to realized and unrealized net losses of $2 million
recorded in fiscal 2007. Operating results were positively impacted by an
increase in average sales prices exceeding the increase in average live
prices.
|
Pork
Segment Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in
millions
|
|
|
|
2009
|
|
|
2008
|
|
|
Change
2009 vs. 2008
|
|
|
2007
|
|
|
Change
2008 vs. 2007
|
|
Sales
|
|
$ |
3,426 |
|
|
$ |
3,587 |
|
|
$ |
(161 |
) |
|
$ |
3,314 |
|
|
$ |
273 |
|
Sales
Volume Change
|
|
|
|
|
|
|
|
|
|
|
1.7 |
% |
|
|
|
|
|
|
6.1 |
% |
Average
Sales Price Change
|
|
|
|
|
|
|
|
|
|
|
(6.1 |
)% |
|
|
|
|
|
|
2.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Income
|
|
$ |
160 |
|
|
$ |
280 |
|
|
$ |
(120 |
) |
|
$ |
145 |
|
|
$ |
135 |
|
Operating
Margin
|
|
|
4.7 |
% |
|
|
7.8 |
% |
|
|
|
|
|
|
4.4 |
% |
|
|
|
|
|
2008 – Operating income
included $5 million of charges related to impairment of packaging
equipment and severance.
|
|
|
|
2009
vs. 2008 –
|
|
●
|
Sales
and Operating Income –
|
|
|
●
|
Operating
results for fiscal 2009 were strong, but down when compared to the record
year we had in fiscal 2008. While sales volume was relatively flat versus
fiscal 2008, results were negatively impacted by a decrease in our average
sales prices, which were only partially offset by the decrease in average
live costs.
|
|
|
●
|
Derivative
Activities – Operating results included the following amounts for
commodity risk management activities related to forward futures contracts
for live hogs. These amounts exclude the impact from related physical sale
and purchase transactions, which impact current and future period
operating results.
|
2009
– Income
|
$55
million
|
2008
– Income
|
95
million
|
Decline
in operating results
|
($40)
million
|
|
2008
vs. 2007 –
|
|
●
|
Sales and Operating Income –
Operating results were impacted positively by lower average live
prices and strong export sales, which led to increased sales volume and a
record year for operating margins. Fiscal 2008 operating results include
realized and unrealized net gains of $95 million from our commodity risk
management activities related to forward futures contracts for live hogs,
excluding the related impact from the physical sale and purchase
transactions, compared to realized and unrealized net gains of $3 million
recorded in fiscal 2007. This was partially offset by higher operating
costs, as well as lower average sales
prices.
|
Prepared
Foods Segment Results
|
|
|
|
|
|
|
|
|
|
|
|
in
millions
|
|
|
|
2009
|
|
|
2008
|
|
|
Change
2009 vs. 2008
|
|
|
2007
|
|
|
Change
2008 vs. 2007
|
|
Sales
|
|
$ |
2,836 |
|
|
$ |
2,711 |
|
|
$ |
125 |
|
|
$ |
2,665 |
|
|
$ |
46 |
|
Sales
Volume Change
|
|
|
|
|
|
|
|
|
|
|
5.2 |
% |
|
|
|
|
|
|
1.5 |
% |
Average
Sales Price Change
|
|
|
|
|
|
|
|
|
|
|
(0.6 |
)% |
|
|
|
|
|
|
0.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Income
|
|
$ |
133 |
|
|
$ |
63 |
|
|
$ |
70 |
|
|
$ |
92 |
|
|
$ |
(29 |
) |
Operating
Margin
|
|
|
4.7 |
% |
|
|
2.3 |
% |
|
|
|
|
|
|
3.5 |
% |
|
|
|
|
|
2009 – Operating income
included a $15 million charge related to closing our Ponca City, Oklahoma,
processed meats plant.
|
|
2008 – Operating income
included $10 million of charges related to flood damage, an intangible
asset impairment and severance.
|
|
2007 – Operating income
included $7 million of charges related to intangible asset
impairments.
|
|
|
|
2009
vs. 2008 –
|
|
●
|
Sales and Operating Income –
Operating results improved due to an increase in sales volume, as
well as a reduction in raw material costs that exceeded the decrease in
our average sales prices. In addition, we made several operational
improvements in fiscal 2009 that allow us to run our plants more
efficiently. We began realizing the majority of these improvements in our
operating results during the latter part of fiscal
2009.
|
|
|
|
2008
vs. 2007 –
|
|
●
|
Sales and Operating Income –
Operating results were negatively impacted by higher raw material
costs, which include wheat, dairy and cooking ingredient costs, partially
offset by lower pork costs. Results were positively impacted by an
increase in average sales
prices.
|
LIQUIDITY
AND CAPITAL RESOURCES
Our cash
needs for working capital, capital expenditures and growth opportunities are
expected to be met with current cash on hand, cash flows provided by operating
activities, or short-term borrowings. Based on our current expectations, we
believe our liquidity and capital resources will be sufficient to operate our
business. However, we may take advantage of opportunities to generate
additional liquidity or refinance through capital market transactions. The
amount, nature and timing of any capital market transactions will depend on our
operating performance and other circumstances, our then-current commitments and
obligations; the amount, nature and timing of our capital requirements; any
limitations imposed by our current credit arrangements; and overall market
conditions.
Cash
Flows from Operating Activities
|
|
|
|
|
|
in
millions
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Net
income (loss)
|
|
$ |
(537 |
) |
|
$ |
86 |
|
|
$ |
268 |
|
Non-cash
items in net income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
496 |
|
|
|
493 |
|
|
|
514 |
|
Deferred
taxes
|
|
|
(26 |
) |
|
|
35 |
|
|
|
5 |
|
Impairment
of goodwill
|
|
|
560 |
|
|
|
- |
|
|
|
- |
|
Impairment
and write-down of assets
|
|
|
32 |
|
|
|
57 |
|
|
|
14 |
|
Other,
net
|
|
|
68 |
|
|
|
26 |
|
|
|
(15 |
) |
Changes
in working capital
|
|
|
432 |
|
|
|
(409 |
) |
|
|
(108 |
) |
Net
cash provided by operating activities
|
|
$ |
1,025 |
|
|
$ |
288 |
|
|
$ |
678 |
|
Changes
in working capital:
|
|
●
|
2009 – Increased
primarily due to a reduction in inventory and accounts receivable
balances, partially offset by a reduction in accounts payable. The lower
inventory balance was primarily due to the reduction of inventory volumes,
as well as a decrease in raw material costs.
|
|
●
|
2008 – Decreased
primarily due to higher inventory and accounts receivable balances,
partially offset by a higher accounts payable balance. Higher inventory
balances were driven by an increase in raw material costs and inventory
volume.
|
|
●
|
2007 – Decreased
primarily due to higher inventory and accounts receivable balances,
partially offset by a higher accounts payable
balance.
|
Cash
Flows from Investing Activities
|
|
|
|
|
|
in
millions
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Additions
to property, plant and equipment
|
|
$ |
(368 |
) |
|
$ |
(425 |
) |
|
$ |
(285 |
) |
Proceeds
from sale of property, plant and equipment
|
|
|
9 |
|
|
|
26 |
|
|
|
76 |
|
Proceeds
from sale (purchase) of marketable securities, net
|
|
|
19 |
|
|
|
(3 |
) |
|
|
16 |
|
Proceeds
from sale of short-term investment
|
|
|
- |
|
|
|
- |
|
|
|
770 |
|
Proceeds
from sale of investments
|
|
|
15 |
|
|
|
22 |
|
|
|
- |
|
Acquisitions,
net of cash acquired
|
|
|
(93 |
) |
|
|
(17 |
) |
|
|
- |
|
Proceeds
from sale of discontinued operation
|
|
|
75 |
|
|
|
- |
|
|
|
- |
|
Change
in restricted cash to be used for investing activities
|
|
|
(43 |
) |
|
|
- |
|
|
|
- |
|
Other,
net
|
|
|
(41 |
) |
|
|
(2 |
) |
|
|
2 |
|
Net
cash provided by (used for) investing activities
|
|
$ |
(427 |
) |
|
$ |
(399 |
) |
|
$ |
579 |
|
|
●
|
Additions
to property, plant and equipment include acquiring new equipment and
upgrading our facilities to maintain competitive standing and position us
for future opportunities. In fiscal 2009, our capital spending included
spending for: improvements made in our prepared foods operations to
increase efficiences; Dynamic Fuels LLC’s (Dynamic Fuels) first facility;
and foreign operations. In fiscal 2008, our capital spending included
equipment updates in our chicken plants, as well as packaging equipment
upgrades in our Fresh Meats case-ready facilities. In fiscal 2007, we
focused on reducing our capital spending.
|
|
|
●
|
Capital
spending for fiscal 2010 is expected to be approximately $600 million, and
includes:
|
|
|
|
●
|
approximately
$400 million on current core business capital spending;
|
|
|
|
●
|
approximately
$150 million on foreign operations, which includes post-acquisition
capital spending related to our Brazil and China acquisitions;
and
|
|
|
|
●
|
approximately
$50 million related to Dynamic Fuels, most of which relates to the
completion of Dynamic Fuels’ first facility. Construction of the first
facility is expected to continue through early 2010, with production
targeted soon thereafter. At October 3, 2009, we had $43 million in
restricted cash available for spending on this
facility.
|
|
|
●
|
Acquisitions
– In October 2008, we acquired three vertically integrated poultry
companies in southern Brazil. The aggregate purchase price was $67
million, of which $4 million of mandatory deferred payments remains to be
paid through fiscal 2011. In addition, we have $15 million of contingent
purchase price based on production volumes anticipated to be paid through
fiscal 2011. The joint ventures in China called Shandong Tyson Xinchang
Foods received the necessary government approvals during fiscal 2009. The
aggregate purchase price for our 60% equity interest was $21 million,
which excludes $93 million of cash transferred to the joint venture for
future capital needs.
|
|
|
●
|
Proceeds
from sale of assets in fiscal 2007 include $40 million received related to
the sale of two poultry plants and related support
facilities.
|
|
|
●
|
Short-term
investment was purchased in fiscal 2006 with proceeds from $1.0 billion of
senior notes maturing on April 1, 2016 (2016 Notes). The short-term
investment was held in an interest bearing account with a trustee. In
fiscal 2007, we used proceeds from sale of the short-term investment to
repay our outstanding $750 million 7.25% Notes due October 1,
2006.
|
|
|
●
|
Change
in restricted cash – In October 2008, Dynamic Fuels received $100 million
in proceeds from the sale of Gulf Opportunity Zone tax-exempt bonds made
available by the federal government to the regions affected by Hurricanes
Katrina and Rita in 2005. The cash received from these bonds is restricted
and can only be used towards the construction of the Dynamic Fuels’
facility.
|
Cash
Flows from Financing Activities
|
|
|
|
|
|
in
millions
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Net
borrowings (payments) on revolving credit facilities
|
|
$ |
15 |
|
|
$ |
(213 |
) |
|
$ |
53 |
|
Payments
on debt
|
|
|
(380 |
) |
|
|
(147 |
) |
|
|
(1,263 |
) |
Net
proceeds from borrowings
|
|
|
852 |
|
|
|
449 |
|
|
|
- |
|
Net
proceeds from Class A stock offering
|
|
|
- |
|
|
|
274 |
|
|
|
- |
|
Convertible
note hedge transactions
|
|
|
- |
|
|
|
(94 |
) |
|
|
- |
|
Warrant
transactions
|
|
|
- |
|
|
|
44 |
|
|
|
- |
|
Purchases
of treasury shares
|
|
|
(19 |
) |
|
|
(30 |
) |
|
|
(61 |
) |
Dividends
|
|
|
(60 |
) |
|
|
(56 |
) |
|
|
(56 |
) |
Stock
options exercised
|
|
|
1 |
|
|
|
9 |
|
|
|
74 |
|
Change
in negative book cash balances
|
|
|
(65 |
) |
|
|
67 |
|
|
|
9 |
|
Change
in restricted cash to be used for financing activities
|
|
|
(140 |
) |
|
|
- |
|
|
|
- |
|
Debt
issuance costs
|
|
|
(59 |
) |
|
|
- |
|
|
|
- |
|
Other,
net
|
|
|
5 |
|
|
|
18 |
|
|
|
(8 |
) |
Net
cash provided by (used for) financing activities
|
|
$ |
150 |
|
|
$ |
321 |
|
|
$ |
(1,252 |
) |
|
●
|
Net
borrowings (payments) on revolving credit facilities primarily include
activity related to the accounts receivable securitization facility. With
the entry into the new revolving credit facility and issuance of the 2014
Notes in March 2009, we repaid all outstanding borrowings under our
accounts receivable securitization facility and terminated the
facility.
|
|
●
|
Payments
on debt include –
|
|
|
●
|
In
fiscal 2009, we bought back $293 million of notes, which included: $161
million 8.25% Notes due October 2011 (2011 Notes); $94 million 7.95% Notes
due February 2010 (2010 Notes); and $38 million 2016
Notes.
|
|
|
●
|
In
fiscal 2008, we bought back $40 million 2016 Notes and repaid the
remaining $25 million outstanding Lakeside term loan.
|
|
|
●
|
In
fiscal 2007, we used proceeds from sale of the short-term investment to
repay our outstanding $750 million 7.25% Notes due October 1, 2006. In
addition, we used cash from operations to reduce the amount outstanding
under the Lakeside term loan by $320 million, repay the outstanding $125
million 7.45% Notes due June 1, 2007, and reduce other
borrowings.
|
|
●
|
Net
proceeds from borrowings include –
|
|
|
●
|
In
fiscal 2009, we issued $810 million of 2014 Notes. After the original
issue discount of $59 million, based on an issue price of 92.756% of face
value, we received net proceeds of $751 million. We used the net proceeds
towards the repayment of our borrowings under our accounts receivable
securitization facility and for other general corporate
purposes.
|
|
|
●
|
In
fiscal 2009, Dynamic Fuels received $100 million in proceeds from the sale
of Gulf Opportunity Zone tax-exempt bonds made available by the Federal
government to the regions affected by Hurricane Katrina and Rita in 2005.
These floating rate bonds are due October 1, 2033.
|
|
|
●
|
In
fiscal 2008, we issued $458 million 3.25% Convertible Senior Notes due
October 15, 2013. Net proceeds were used for the net cost of the related
Convertible Note Hedge and Warrant Transactions, toward the repayment of
our borrowings under the accounts receivable securitization facility, and
for other general corporate
purposes.
|
|
●
|
In
fiscal 2008, we issued 22.4 million shares of Class A stock in a public
offering. Net proceeds were used toward repayment of our borrowings under
the accounts receivable securitization facility and for other general
corporate purposes.
|
|
●
|
In
conjunction with the entry into our new credit facility and the issuance
of the 2014 Notes during fiscal 2009, we paid $48 million for debt
issuance costs.
|
|
●
|
We
have $140 million of 2010 Notes outstanding. We originally placed $234
million of the net proceeds from the 2014 Notes in a blocked cash
collateral account to be used for the payment, prepayment, repurchase or
defeasance of the 2010 Notes. At October 3, 2009, we had $140 million
remaining in the blocked cash collateral account.
|
|
●
|
At
October 3, 2009, we had $839 million outstanding 2011 Notes. We plan
presently to use current cash on hand and cash flows from operations for
payment on the 2011 Notes.
|
Liquidity
|
|
|
|
|
|
|
|
|
|
|
|
in
millions
|
|
|
Commitments
Expiration
Date
|
|
Facility
Amount
|
|
|
Outstanding
Letters
of
Credit under
Revolving
Credit Facility
(no
draw downs)
|
|
|
Amount
Borrowed
|
|
|
Amount
Available
|
|
Cash
and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,004 |
|
Revolving
credit facility
|
March
2012
|
|
$ |
1,000 |
|
|
$ |
267 |
|
|
$ |
- |
|
|
$ |
733 |
|
Total
liquidity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,737 |
|
●
|
The
revolving credit facility supports our short-term funding needs and
letters of credit. Letters of credit are issued primarily in support of
workers’ compensation insurance programs, derivative activities and
Dynamic Fuels’ Gulf Opportunity Zone tax-exempt bonds.
|
●
|
We
completed the sale of Lakeside in March 2009. Inclusive of the working
capital of Lakeside initially retained by us at closing, as well as
consideration received from XL Foods, we expect the following future cash
flows based on the October 3, 2009, currency exchange rate: approximately
$10 million in fiscal 2010; $45 million in notes receivable, plus
interest, to be paid by March 2011 by XL Foods; and $24 million of XL
Foods preferred stock redeemable through March 2014. The discontinuance of
Lakeside’s operation will not have a material effect on our future
operating cash flows.
|
●
|
Our
current ratio at October 3, 2009, and September 27, 2008, was 2.20 to 1
and 2.07 to 1, respectively.
|
Deterioration
of Credit and Capital Markets
Credit
market conditions deteriorated rapidly during our fourth quarter of fiscal 2008
and continued into fiscal 2009. Several major banks and financial institutions
failed or were forced to seek assistance through distressed sales or emergency
government measures. While not all-inclusive, the following summarizes some of
the impacts to our business:
Credit
Facility
Cash
flows from operating activities and current cash on hand are our primary sources
of liquidity for funding debt service and capital expenditures. We also have a
revolving credit facility, with a committed capacity of $1.0 billion, to provide
additional liquidity for working capital needs, letters of credit, and as a
source of financing for growth opportunities. As of October 3, 2009, we had
outstanding letters of credit under our revolving credit agreement totaling $267
million, none of which were drawn upon, which left $733 million available for
borrowing. Our revolving credit facility is funded by a syndicate of 19 banks,
with commitments ranging from $6 million to $115 million per bank. If any of the
banks in the syndicate were unable to perform on their commitments to fund the
facility, our liquidity could be impaired, which could reduce our ability to
fund working capital needs, support letters of credit or finance our growth
opportunities.
Customers/Suppliers
The
financial condition of some of our customers and suppliers could also be
impaired by current market conditions. Although we have not experienced a
material increase in customer bad debts or non-performance by suppliers, current
market conditions increase the probability we could experience losses from
customer or supplier defaults. Should current credit and capital market
conditions result in a prolonged economic downturn in the United States and
abroad, demand for protein products could be reduced, which could result in a
reduction of sales, operating income and cash flows. In addition, we rely on
livestock producers throughout the country to supply our live cattle and hogs.
If these producers are adversely impacted by the current economic conditions and
go out of business, our livestock supply for processing could be significantly
impacted.
Additionally,
we have cash flow assistance programs in which certain livestock suppliers
participate. Under these programs, we pay an amount for livestock equivalent to
a standard cost to grow such livestock during periods of low market sales
prices. The amounts of such payments that are in excess of the market sales
price are recorded as receivables and accrue interest. Participating suppliers
are obligated to repay these receivables balances when market sales prices
exceed this standard cost, or upon termination of the
agreement.
Our maximum obligation associated with these programs is limited to the fair
value of each participating livestock supplier’s net tangible assets. Although
we believe the aggregate maximum obligation under the program is unlikely to
ever be reached, the potential maximum obligation as of October 3, 2009, is
approximately $250 million. The total receivables under these programs were $72
million and $7 million at October 3, 2009 and September 27, 2008, respectively.
Even though these programs are limited to the net tangible assets of the
participating livestock suppliers, we also manage a portion of our credit risk
associated with these programs by obtaining security interests in livestock
suppliers' assets. After analyzing residual credit risks and general market
conditions, we have recorded an allowance for these programs' estimated
uncollectible receivables of $20 million and $2 million at October 3, 2009, and
September 27, 2008, respectively.
Investments
The value
of our investments in equity and debt securities, including our marketable debt
securities, company-owned life insurance and pension and other postretirement
plan assets, has been impacted by the market volatility over the past year.
These instruments were recorded at fair value as of October 3, 2009. During
fiscal 2009, we had a reduction in fair value resulting in the recognition
through earnings of $11 million.
We
currently oversee two domestic and one foreign subsidiary non-contributory
qualified defined benefit pension plans. All three pension plans are frozen to
new participants and no additional benefits will accrue for participants. Based
on our 2009 actuarial valuation, we anticipate contributions of $2 million to
these plans for fiscal 2010. We also have one domestic unfunded defined benefit
plan. Based on our 2009 actuarial valuation, we anticipate contributions of $2
million to this plan for fiscal 2010.
Financial
Instruments
As part
of our commodity risk management activities, we use derivative financial
instruments, primarily futures and options, to reduce our exposure to various
market risks related to commodity purchases. Similar to the capital markets, the
commodities markets have been volatile over the past year. Grain and some energy
prices reached an all-time high during our fourth quarter of fiscal 2008 before
falling sharply. While the reduction in grain and energy prices benefit us
long-term, we recorded losses related to these financial instruments in fiscal
2009 of $257 million. We have recently implemented policies to reduce our
earnings volatility associated with mark-to-market derivative activities,
including more use of normal physical purchases and normal physical sales which
are not required to be marked to market.
Insurance
We rely
on insurers as a protection against liability claims, property damage and
various other risks. Our primary insurers maintain an A.M. Best Financial
Strength Rating of A or better. Nevertheless, we continue to monitor this
situation as insurers have been and are expected to continue to be impacted by
the current capital market environment.
Capitalization
|
|
|
|
|
in
millions
|
|
|
|
2009
|
|
|
2008
|
|
Senior
notes
|
|
$ |
3,323 |
|
|
$ |
2,858 |
|
GO
Zone tax-exempt bonds
|
|
|
100 |
|
|
|
- |
|
Other
indebtedness
|
|
|
129 |
|
|
|
38 |
|
Total
Debt
|
|
$ |
3,552 |
|
|
$ |
2,896 |
|
|
|
|
|
|
|
|
|
|
Total
Equity
|
|
$ |
4,352 |
|
|
$ |
5,014 |
|
|
|
|
|
|
|
|
|
|
Debt
to Capitalization Ratio
|
|
|
44.9 |
% |
|
|
36.6 |
% |
●
|
In
fiscal 2009, we issued $810 million of 2014 Notes. The 2014 Notes had an
original issue discount of $59 million, based on an issue price of 92.756%
of face value. We used the net proceeds towards the repayment of our
borrowings under our accounts receivable securitization facility and for
other general corporate purposes. In addition, Dynamic Fuels received $100
million in proceeds from the sale of Gulf Opportunity Zone tax-exempt
bonds made available by the Federal government to the regions affected by
Hurricane Katrina and Rita in 2005. These floating rate bonds are due
October 1, 2033.
|
●
|
In
fiscal 2009, we bought back $293 million of notes, which included: $161
million 2011 Notes; $94 million 2010 Notes; and $38 million 2016
Notes.
|
●
|
At
October 3, 2009, we had a total of approximately $1.2 billion of cash and
cash equivalents and restricted
cash.
|
Credit
Ratings
2016
Notes
On
September 4, 2008, Standard & Poor’s (S&P) downgraded the credit rating
from “BBB-” to “BB.” This downgrade increased the interest rate on the 2016
Notes from 6.85% to 7.35%, effective beginning with the six-month interest
payment due October 1, 2008.
On
November 13, 2008, Moody’s Investors Services, Inc. (Moody’s) downgraded the
credit rating from “Ba1” to “Ba3.” This downgrade increased the interest rate on
the 2016 Notes from 7.35% to 7.85%, effective beginning with the six-month
interest payment due April 1, 2009.
S&P
currently rates the 2016 Notes “BB.” Moody’s currently rates this debt “Ba3.” A
further one-notch downgrade by either ratings agency would increase the interest
rates on the 2016 Notes by an additional 0.25%.
Revolving Credit
Facility
S&P’s
corporate credit rating for Tyson Foods, Inc. is “BB.” Moody’s corporate credit
rating for Tyson Foods, Inc. is “Ba3.” If S&P were to downgrade our
corporate credit rating to “B+” or lower or Moody’s were to downgrade our
corporate credit rating to “B1” or lower, our letter of credit fees would
increase by an additional 0.25%.
Debt
Covenants
Our
revolving credit facility contains affirmative and negative covenants that,
among other things, may limit or restrict our ability to: create liens and
encumbrances; incur debt; merge, dissolve, liquidate or consolidate; make
acquisitions and investments; dispose of or transfer assets; pay dividends or
make other payments in respect to our capital stock; amend material documents;
change the nature of our business; make certain payments of debt; engage in
certain transactions with affiliates; and enter into sale/leaseback or hedging
transactions, in each case, subject to certain qualifications and exceptions. If
availability under this facility is less than the greater of 15% of the
commitments and $150 million, we will be required to maintain a minimum fixed
charge coverage ratio.
Our 2014
Notes also contain affirmative and negative covenants that, among other things,
may limit or restrict our ability to: incur additional debt and issue preferred
stock; make certain investments and restricted payments; create liens; create
restrictions on distributions from restricted subsidiaries; engage in specified
sales of assets and subsidiary stock; enter into transactions with affiliates;
enter new lines of business; engage in consolidation, mergers and acquisitions;
and engage in certain sale/leaseback transactions.
OFF-BALANCE
SHEET ARRANGEMENTS
We do not
have any off-balance sheet arrangements material to our financial position or
results of operations. The off-balance sheet arrangements we have are guarantees
of debt of outside third parties, including a lease and grower loans, and
residual value guarantees covering certain operating leases for various types of
equipment. See Note 10, “Commitments” of the Notes to Consolidated Financial
Statements for further discussion.
CONTRACTUAL
OBLIGATIONS
The
following table summarizes our contractual obligations as of October 3,
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in
millions
|
|
|
|
Payments
Due by Period
|
|
|
|
2010
|
|
|
|
2011-2012 |
|
|
|
2013-2014 |
|
|
2015
and thereafter
|
|
|
Total
|
|
Debt
and capital lease obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal
payments (1)
|
|
$ |
219 |
|
|
$ |
866 |
|
|
$ |
1,280 |
|
|
$ |
1,241 |
|
|
$ |
3,606 |
|
Interest
payments (2)
|
|
|
289 |
|
|
|
444 |
|
|
|
327 |
|
|
|
220 |
|
|
|
1,280 |
|
Guarantees
(3)
|
|
|
22 |
|
|
|
33 |
|
|
|
43 |
|
|
|
16 |
|
|
|
114 |
|
Operating
lease obligations (4)
|
|
|
79 |
|
|
|
120 |
|
|
|
55 |
|
|
|
22 |
|
|
|
276 |
|
Purchase
obligations (5)
|
|
|
423 |
|
|
|
55 |
|
|
|
19 |
|
|
|
22 |
|
|
|
519 |
|
Capital
expenditures (6)
|
|
|
267 |
|
|
|
11 |
|
|
|
- |
|
|
|
- |
|
|
|
278 |
|
Other
long-term liabilities (7)
|
|
|
13 |
|
|
|
5 |
|
|
|
5 |
|
|
|
36 |
|
|
|
59 |
|
Total
contractual commitments
|
|
$ |
1,312 |
|
|
$ |
1,534 |
|
|
$ |
1,729 |
|
|
$ |
1,557 |
|
|
$ |
6,132 |
|
(1)
|
In
the event of a default on payment, acceleration of the principal payments
could occur.
|
(2)
|
Interest
payments include interest on all outstanding debt. Payments are estimated
for variable rate and variable term debt based on effective rates at
October 3, 2009, and expected payment dates.
|
(3)
|
Amounts
include guarantees of debt of outside third parties, which consist of a
lease and grower loans, all of which are substantially collateralized by
the underlying assets, as well as residual value guarantees covering
certain operating leases for various types of equipment. The amounts
included are the maximum potential amount of future
payments.
|
(4)
|
Amounts
include minimum lease payments under lease agreements.
|
(5)
|
Amounts
include agreements to purchase goods or services that are enforceable and
legally binding and specify all significant terms, including: fixed or
minimum quantities to be purchased; fixed, minimum or variable price
provisions; and the approximate timing of the transaction. The purchase
obligations amount included items, such as future purchase commitments for
grains, livestock contracts and fixed grower fees that provide terms that
meet the above criteria. We have excluded future purchase commitments for
contracts that do not meet these criteria. Purchase orders have not been
included in the table, as a purchase order is an authorization to purchase
and may not be considered an enforceable and legally binding contract.
Contracts for goods or services that contain termination clauses without
penalty have also been excluded.
|
(6)
|
Amounts
include estimated amounts to complete buildings and equipment under
construction as of October 3, 2009.
|
(7)
|
Amounts
include items that meet the definition of a purchase obligation and are
recorded in the Consolidated Balance
Sheets.
|
In
addition to the amounts shown above in the table, we have unrecognized tax
benefits of $233 million and related interest and penalties of $71 million at
October 3, 2009, recorded as liabilities. During fiscal 2010, tax audit
resolutions could potentially reduce these amounts by approximately $30 million,
either because tax positions are sustained on audit or because we agree to their
disallowance.
The
maximum contractual obligation associated with our cash flow assistance programs
at October 3, 2009, based on the estimated fair values of the livestock
supplier’s net tangible assets on that date, aggregated to approximately $250
million, or approximately $178 million remaining maximum
commitment after netting the cash flow assistance related
receivables.
The
minority partner in our Shandong Tyson Xinchang Foods joint ventures in China
has the right to exercise put options to require us to purchase their entire 40%
equity interest at a price equal to the minority partner’s contributed capital
plus (minus) its pro-rata share of the joint venture's accumulated and
undistributed net earnings (losses). The put options are exercisable for a
five-year term commencing the later of (i) April 2011 or (ii) the date upon
which a shareholder of the minority partner is no longer general manager of the
joint venture operations. At October 3, 2009, the put options, if they had been
exercisable, would have resulted in a purchase price of approximately $74
million for the minority partner’s entire equity interest.
RECENTLY
ISSUED/ADOPTED ACCOUNTING PRONOUNCEMENTS
Refer to
the discussion under Part II, Item 8, Notes to Consolidated Financial
Statements, Note 1: Business and Summary of Significant Accounting Policies for
recently issued accounting pronouncements and Note 2: Change in Accounting
Principles for recently adopted accounting pronouncements.
CRITICAL
ACCOUNTING ESTIMATES
The
preparation of consolidated financial statements requires us to make estimates
and assumptions. These estimates and assumptions affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates. The following is a summary of certain accounting estimates
we consider critical.
Description
|
|
Judgments
and Uncertainties
|
|
Effect
if Actual Results Differ From Assumptions
|
|
|
|
|
|
Contingent
liabilities
|
|
|
|
|
We
are subject to lawsuits, investigations and other claims related to wage
and hour/labor, environmental, product, taxing authorities and other
matters, and are required to assess the likelihood of any adverse
judgments or outcomes to these matters, as well as potential ranges of
probable losses.
A
determination of the amount of reserves and disclosures required, if any,
for these contingencies are made after considerable analysis of each
individual issue. We accrue for contingent liabilities when an assessment
of the risk of loss is probable and can be reasonably estimated. We
disclose contingent liabilities when the risk of loss is reasonably
possible or probable.
|
|
Our
contingent liabilities contain uncertainties because the eventual outcome
will result from future events, and determination of current reserves
requires estimates and judgments related to future changes in facts and
circumstances, differing interpretations of the law and assessments of the
amount of damages, and the effectiveness of strategies or other factors
beyond our control.
|
|
We
have not made any material changes in the accounting methodology used to
establish our contingent liabilities during the past three fiscal
years.
We
do not believe there is a reasonable likelihood there will be a material
change in the estimates or assumptions used to calculate our contingent
liabilities. However, if actual results are not consistent with our
estimates or assumptions, we may be exposed to gains or losses that could
be material.
|
|
|
|
|
|
Marketing
and advertising costs
|
|
|
|
|
We
incur advertising, retailer incentive and consumer incentive costs to
promote products through marketing programs. These programs include
cooperative advertising, volume discounts, in-store display incentives,
coupons and other programs.
Marketing
and advertising costs are charged in the period incurred. We accrue costs
based on the estimated performance, historical utilization and redemption
of each program.
Cash
consideration given to customers is considered a reduction in the price of
our products, thus recorded as a reduction to sales. The remainder of
marketing and advertising costs is recorded as a selling, general and
administrative expense.
|
|
Recognition
of the costs related to these programs contains uncertainties due to
judgment required in estimating the potential performance and redemption
of each program.
These
estimates are based on many factors, including experience of similar
promotional programs.
|
|
We
have not made any material changes in the accounting methodology used to
establish our marketing accruals during the past three fiscal
years.
We
do not believe there is a reasonable likelihood there will be a material
change in the estimates or assumptions used to calculate our marketing
accruals. However, if actual results are not consistent with our estimates
or assumptions, we may be exposed to gains or losses that could be
material.
A
10% change in our marketing accruals at October 3, 2009, would impact
pretax earnings by approximately $9
million.
|
Description
|
|
Judgments
and Uncertainties
|
|
Effect
if Actual Results Differ From Assumptions
|
|
|
|
|
|
Accrued
self insurance
|
|
|
|
|
We
are self insured for certain losses related to health and welfare,
workers’ compensation, auto liability and general liability
claims.
We
use an independent third-party actuary to assist in determining our
self-insurance liability. We and the actuary consider a number of factors
when estimating our self-insurance liability, including claims experience,
demographic factors, severity factors and other actuarial
assumptions.
We
periodically review our estimates and assumptions with our third-party
actuary to assist us in determining the adequacy of our self-insurance
liability. Our policy is to maintain an accrual within the central to high
point of the actuarial range.
|
|
Our
self-insurance liability contains uncertainties due to assumptions
required and judgment used.
Costs
to settle our obligations, including legal and healthcare costs, could
increase or decrease causing estimates of our self-insurance liability to
change.
Incident
rates, including frequency and severity, could increase or decrease
causing estimates in our self-insurance liability to
change.
|
|
We
have not made any material changes in the accounting methodology used to
establish our self-insurance liability during the past three fiscal
years.
We
do not believe there is a reasonable likelihood there will be a material
change in the estimates or assumptions used to calculate our
self-insurance liability. However, if actual results are not consistent
with our estimates or assumptions, we may be exposed to gains or losses
that could be material.
A
10% increase in the actuarial range at October 3, 2009, would result in an
increase in the amount we recorded for our self-insurance liability of
approximately $15 million. A 10% decrease in the actuarial range at
October 3, 2009, would result in a reduction in the amount we recorded for
our self-insurance liability of approximately $3
million.
|
|
|
|
|
|
Impairment
of long-lived assets
|
|
|
|
|
Long-lived
assets are evaluated for impairment whenever events or changes in
circumstances indicate the carrying value may not be recoverable. Examples
include a significant adverse change in the extent or manner in which we
use a long-lived asset or a change in its physical condition.
When
evaluating long-lived assets for impairment, we compare the carrying value
of the asset to the asset’s estimated undiscounted future cash flows. An
impairment is indicated if the estimated future cash flows are less than
the carrying value of the asset. The impairment is the excess of the
carrying value over the fair value of the long-lived asset.
We
recorded impairment charges related to long-lived assets of $25 million,
$52 million and $6 million, respectively, in fiscal years 2009, 2008 and
2007.
|
|
Our
impairment analysis contains uncertainties due to judgment in assumptions
and estimates surrounding undiscounted future cash flows of the long-lived
asset, including forecasting useful lives of assets and selecting the
discount rate that reflects the risk inherent in future cash flows to
determine fair value.
|
|
We
have not made any material changes in the accounting methodology used to
evaluate the impairment of long-lived assets during the last three fiscal
years.
We
do not believe there is a reasonable likelihood there will be a material
change in the estimates or assumptions used to calculate impairments of
long-lived assets. However, if actual results are not consistent with our
estimates and assumptions used to calculate estimated future cash flows,
we may be exposed to impairment losses that could be
material.
|
Description
|
|
Judgments
and Uncertainties
|
|
Effect
if Actual Results Differ From Assumptions
|
|
|
|
|
|
Impairment
of goodwill and other intangible assets
|
|
|
Goodwill
impairment is determined using a two-step process. The first step is to
identify if a potential impairment exists by comparing the fair value of a
reporting unit with its carrying amount, including goodwill. If the fair
value of a reporting unit exceeds its carrying amount, goodwill of the
reporting unit is not considered to have a potential impairment and the
second step of the impairment test is not necessary. However, if the
carrying amount of a reporting unit exceeds its fair value, the second
step is performed to determine if goodwill is impaired and to measure the
amount of impairment loss to recognize, if any.
The
second step compares the implied fair value of goodwill with the carrying
amount of goodwill. If the implied fair value of goodwill exceeds the
carrying amount, then goodwill is not considered impaired. However, if the
carrying amount of goodwill exceeds the implied fair value, an impairment
loss is recognized in an amount equal to that excess.
The
implied fair value of goodwill is determined in the same manner as the
amount of goodwill recognized in a business combination (i.e., the fair
value of the reporting unit is allocated to all the assets and
liabilities, including any unrecognized intangible assets, as if the
reporting unit had been acquired in a business combination and the fair
value of the reporting unit was the purchase price paid to acquire the
reporting unit).
For
other intangible assets, if the carrying value of the intangible asset
exceeds its fair value, an impairment loss is recognized in an amount
equal to that excess.
We
have elected to make the first day of the fourth quarter the annual
impairment assessment date for goodwill and other intangible assets.
However, we could be required to evaluate the recoverability of goodwill
and other intangible assets prior to the required annual assessment if we
experience disruptions to the business, unexpected significant declines in
operating results, divestiture of a significant component of the business
or a sustained decline in market capitalization.
|
|
We
estimate the fair value of our reporting units, generally our operating
segments, using various valuation techniques, with the primary technique
being a discounted cash flow analysis. A discounted cash flow analysis
requires us to make various judgmental assumptions about sales, operating
margins, growth rates and discount rates. Assumptions about sales,
operating margins and growth rates are based on our budgets, business
plans, economic projections, anticipated future cash flows and marketplace
data. Assumptions are also made for varying perpetual growth rates for
periods beyond the long-term business plan period.
While
estimating the fair value of our Chicken and Beef reporting units, we
assumed operating margins in future years in excess of the annualized
margins realized in the most current year. The fair value estimates for
these reporting units assume normalized operating margin assumptions and
improved operating efficiencies based on long-term expectations and
margins historically realized in the beef and chicken industries. We
estimate the fair value of our Chicken reporting unit would be in excess
of its carrying amount, including goodwill, by sustaining long-term
operating margins of approximately 5.0%. After the $560 million non-cash
impairment recognized in fiscal 2009, we estimate the fair value of our
Beef reporting unit would be in excess of its carrying amount, including
goodwill, by sustaining long-term operating margins of approximately
2.0%.
Other
intangible asset fair values have been calculated for trademarks using a
royalty rate method. Assumptions about royalty rates are based on the
rates at which similar brands and trademarks are licensed in the
marketplace.
Our
impairment analysis contains uncertainties due to uncontrollable events
that could positively or negatively impact the anticipated future economic
and operating conditions.
|
|
We
have not made any material changes in the accounting methodology used to
evaluate impairment of goodwill and other intangible assets during the
last three years.
The
recent disruptions in global credit and other financial markets and
deterioration of economic conditions led to an increase in our discount
rate. The discount rate used in our annual goodwill impairment test
increased to 10.1% in fiscal 2009 from 9.3% in fiscal 2008. There were no
significant changes in the other key estimates and
assumptions. As a result of the significantly increased
discount rate, we failed the first step of the fiscal 2009 goodwill
impairment analysis for our Beef reporting unit and performed the second
step. The second step resulted in a $560 million non-cash partial
impairment of the Beef reporting unit's goodwill.
No
other reporting units failed the first step of the annual goodwill
impairment analysis in fiscal 2009, 2008 and 2007 and therefore, the
second step was not necessary. However, a 10% decline in fair value of our
Chicken reporting unit would have caused the carrying value for this
reporting unit to be in excess of fair value which would require the
second step to be performed. The second step could have resulted in an
impairment loss for the Chicken reporting unit's goodwill.
After
the $560 million non-cash impairment recognized in fiscal 2009, a 17%
decline in fair value of our Beef reporting unit would have caused the
adjusted carrying value for this reporting unit to be in excess of fair
value.
Some
of the inherent estimates and assumptions used in determining fair value
of the reporting units are outside the control of management, including
interest rates, cost of capital, tax rates, and our credit
ratings. While we believe we have made reasonable estimates and
assumptions to calculate the fair value of the reporting units and other
intangible assets, it is possible a material change could occur. If our
actual results are not consistent with our estimates and assumptions used
to calculate fair value, we may be required to perform the second step
which could result in additional material impairments of our
goodwill.
Our
fiscal 2009 other intangible asset impairment analysis did not result in a
material impairment charge. A hypothetical 10% decrease in the fair value
of intangible assets would not result in a material
impairment.
|
Description
|
|
Judgments
and Uncertainties
|
|
Effect
if Actual Results Differ From Assumptions
|
|
|
|
|
|
Income
taxes
|
|
|
|
|
We
estimate total income tax expense based on statutory tax rates and tax
planning opportunities available to us in various jurisdictions in which
we earn income.
Federal
income tax includes an estimate for taxes on earnings of foreign
subsidiaries expected to be remitted to the United States and be taxable,
but not for earnings considered indefinitely invested in the foreign
subsidiary.
Deferred
income taxes are recognized for the future tax effects of temporary
differences between financial and income tax reporting using tax rates in
effect for the years in which the differences are expected to
reverse.
Valuation
allowances are recorded when it is likely a tax benefit will not be
realized for a deferred tax asset.
We
record unrecognized tax benefit liabilities for known or anticipated tax
issues based on our analysis of whether, and the extent to which,
additional taxes will be due.
|
|
Changes
in tax laws and rates could affect recorded deferred tax assets and
liabilities in the future.
Changes
in projected future earnings could affect the recorded valuation
allowances in the future.
Our
calculations related to income taxes contain uncertainties due to judgment
used to calculate tax liabilities in the application of complex tax
regulations across the tax jurisdictions where we operate.
Our
analysis of unrecognized tax benefits contains uncertainties based on
judgment used to apply the more likely than not recognition and
measurement thresholds.
|
|
We
do not believe there is a reasonable likelihood there will be a material
change in the tax related balances or valuation allowances. However, due
to the complexity of some of these uncertainties, the ultimate resolution
may result in a payment that is materially different from the current
estimate of the tax liabilities.
To
the extent we prevail in matters for which unrecognized tax benefits have
been established, or are required to pay amounts in excess of our recorded
unrecognized tax benefits, our effective tax rate in a given financial
statement period could be materially affected. An unfavorable tax
settlement would require use of our cash and result in an increase in our
effective tax rate in the period of resolution. A favorable tax settlement
would be recognized as a reduction in our effective tax rate in the period
of resolution.
|
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
MARKET
RISK
Market
risk relating to our operations results primarily from changes in commodity
prices, interest rates and foreign exchange rates, as well as credit risk
concentrations. To address certain of these risks, we enter into various
derivative transactions as described below. If a derivative instrument is
accounted for as a hedge, depending on the nature of the hedge, changes in the
fair value of the instrument either will be offset against the change in fair
value of the hedged assets, liabilities or firm commitments through earnings, or
be recognized in other comprehensive income (loss) until the hedged item is
recognized in earnings. The ineffective portion of an instrument’s change in
fair value is recognized immediately. Additionally, we hold certain positions,
primarily in grain and livestock futures that either do not meet the criteria
for hedge accounting or are not designated as hedges. With the exception of
normal purchases and normal sales that are expected to result in physical
delivery, we record these positions at fair value, and the unrealized gains and
losses are reported in earnings at each reporting date. Changes in market value
of derivatives used in our risk management activities relating to forward sales
contracts are recorded in sales. Changes in market value of derivatives used in
our risk management activities surrounding inventories on hand or anticipated
purchases of inventories are recorded in cost of sales.
The
sensitivity analyses presented below are the measures of potential losses of
fair value resulting from hypothetical changes in market prices related to
commodities. Sensitivity analyses do not consider the actions we may take to
mitigate our exposure to changes, nor do they consider the effects such
hypothetical adverse changes may have on overall economic activity. Actual
changes in market prices may differ from hypothetical changes.
Commodities Risk: We purchase
certain commodities, such as grains and livestock, in the course of normal
operations. As part of our commodity risk management activities, we use
derivative financial instruments, primarily futures and options, to reduce the
effect of changing prices and as a mechanism to procure the underlying
commodity. However, as the commodities underlying our derivative financial
instruments can experience significant price fluctuations, any requirement to
mark-to-market the positions that have not been designated or do not qualify as
hedges could result in volatility in our results of operations. Contract terms
of a hedge instrument closely mirror those of the hedged item providing a high
degree of risk reduction and correlation. Contracts designated and highly
effective at meeting this risk reduction and correlation criteria are recorded
using hedge accounting. The following table presents a sensitivity analysis
resulting from a hypothetical change of 10% in market prices as of October 3,
2009, and September 27, 2008, on the fair value of open positions. The fair
value of such positions is a summation of the fair values calculated for each
commodity by valuing each net position at quoted futures prices. The market risk
exposure analysis includes hedge and non-hedge derivative financial
instruments.
Effect
of 10% change in fair value
|
|
|
|
|
in
millions
|
|
|
|
2009
|
|
|
2008
|
|
Livestock:
|
|
|
|
|
|
|
Cattle
|
|
$ |
20 |
|
|
$ |
78 |
|
Hogs
|
|
|
12 |
|
|
|
31 |
|
|
|
|
|
|
|
|
|
|
Grain
|
|
|
1 |
|
|
|
88 |
|
Interest Rate Risk: At October
3, 2009, we had fixed-rate debt of $3.3 billion with a weighted average interest
rate of 7.9%. We have exposure to changes in interest rates on this fixed-rate
debt. Market risk for fixed-rate debt is estimated as the potential increase in
fair value, resulting from a hypothetical 10% decrease in interest rates. A
hypothetical 10% decrease in interest rates would have increased the fair value
of our fixed-rate debt by approximately $32 million at October 3, 2009, and $45
million at September 27, 2008. The fair values of our debt were estimated based
on quoted market prices and/or published interest rates.
At
October 3, 2009, we had variable rate debt of $218 million with a weighted
average interest rate of 4.3%. A hypothetical 10% increase in interest rates
effective at October 3, 2009, and September 27, 2008, would have a minimal
effect on interest expense.
Foreign Currency Risk: We have
foreign exchange gain/loss exposure from fluctuations in foreign currency
exchange rates primarily as a result of certain receivable and payable balances.
The primary currency exchanges we have exposure to are the Canadian dollar, the
Chinese renminbi, the Mexican peso, the European euro, the British pound
sterling and the Brazilian real. We periodically enter into foreign exchange
forward contracts to hedge some portion of our foreign currency exposure. A
hypothetical 10% change in foreign exchange rates effective at October 3, 2009,
and September 27, 2008, related to the foreign exchange forward contracts would
have a $15 million and $11 million, respectively, impact on pretax income. In
the future, we may enter into more foreign exchange forward contracts as a
result of our international growth strategy.
Concentrations of Credit Risk:
Our financial instruments exposed to concentrations of credit risk consist
primarily of cash equivalents and trade receivables. Our 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 our
large number of customers and their dispersion across geographic areas. We
perform periodic credit evaluations of our customers’ financial condition and
generally do not require collateral. At October 3, 2009, and September 27, 2008,
13.0% and 12.2%, respectively, of our net accounts receivable balance was due
from Wal-Mart Stores, Inc. No other single customer or customer group represents
greater than 10% of net accounts receivable.
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED
STATEMENTS OF INCOME
|
|
Three
years ended October 3, 2009
|
|
|
|
in
millions, except per share data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Sales
|
|
$ |
26,704 |
|
|
$ |
26,862 |
|
|
$ |
25,729 |
|
Cost
of Sales
|
|
|
25,501 |
|
|
|
25,616 |
|
|
|
24,300 |
|
|
|
|
1,203 |
|
|
|
1,246 |
|
|
|
1,429 |
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
841 |
|
|
|
879 |
|
|
|
814 |
|
Goodwill
impairment
|
|
|
560 |
|
|
|
- |
|
|
|
- |
|
Other
charges
|
|
|
17 |
|
|
|
36 |
|
|
|
2 |
|
Operating
Income (Loss)
|
|
|
(215 |
) |
|
|
331 |
|
|
|
613 |
|
Other
(Income) Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
(17 |
) |
|
|
(9 |
) |
|
|
(8 |
) |
Interest
expense
|
|
|
310 |
|
|
|
215 |
|
|
|
232 |
|
Other,
net
|
|
|
18 |
|
|
|
(29 |
) |
|
|
(21 |
) |
|
|
|
311 |
|
|
|
177 |
|
|
|
203 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(Loss) from Continuing Operations before
Income
Taxes and Minority Interest
|
|
|
(526 |
) |
|
|
154 |
|
|
|
410 |
|
Income
Tax Expense
|
|
|
14 |
|
|
|
68 |
|
|
|
142 |
|
Income
(Loss) from Continuing Operations
before
Minority Interest
|
|
|
(540 |
) |
|
|
86 |
|
|
|
268 |
|
Minority
Interest
|
|
|
(4 |
) |
|
|
- |
|
|
|
- |
|
Income
(Loss) from Continuing Operations
|
|
|
(536 |
) |
|
|
86 |
|
|
|
268 |
|
Loss
from Discontinued Operation, Net of Tax $11, $0, $0
|
|
|
(1 |
) |
|
|
- |
|
|
|
- |
|
Net
Income (Loss)
|
|
$ |
(537 |
) |
|
$ |
86 |
|
|
$ |
268 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Shares Outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A Basic
|
|
|
302 |
|
|
|
281 |
|
|
|
273 |
|
Class
B Basic
|
|
|
70 |
|
|
|
70 |
|
|
|
75 |
|
Diluted
|
|
|
372 |
|
|
|
356 |
|
|
|
355 |
|
Earnings
(Loss) Per Share from Continuing Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A Basic
|
|
$ |
(1.47 |
) |
|
$ |
0.25 |
|
|
$ |
0.79 |
|
Class
B Basic
|
|
$ |
(1.32 |
) |
|
$ |
0.22 |
|
|
$ |
0.70 |
|
Diluted
|
|
$ |
(1.44 |
) |
|
$ |
0.24 |
|
|
$ |
0.75 |
|
Loss
Per Share from Discontinued Operation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A Basic
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Class
B Basic
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Diluted
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Net
Earnings (Loss) per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A Basic
|
|
$ |
(1.47 |
) |
|
$ |
0.25 |
|
|
$ |
0.79 |
|
Class
B Basic
|
|
$ |
(1.32 |
) |
|
$ |
0.22 |
|
|
$ |
0.70 |
|
Diluted
|
|
$ |
(1.44 |
) |
|
$ |
0.24 |
|
|
$ |
0.75 |
|
See
accompanying notes.
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED
BALANCE SHEETS
October
3, 2009, and September 27, 2008
|
|
in
millions, except share and per share data
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
Assets
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
1,004 |
|
|
$ |
250 |
|
Restricted
cash
|
|
|
140 |
|
|
|
- |
|
Accounts
receivable, net
|
|
|
1,100 |
|
|
|
1,271 |
|
Inventories,
net
|
|
|
2,009 |
|
|
|
2,538 |
|
Other
current assets
|
|
|
122 |
|
|
|
143 |
|
Assets
of discontinued operation held for sale
|
|
|
- |
|
|
|
159 |
|
Total
Current Assets
|
|
|
4,375 |
|
|
|
4,361 |
|
Restricted
Cash
|
|
|
43 |
|
|
|
- |
|
Net
Property, Plant and Equipment
|
|
|
3,576 |
|
|
|
3,519 |
|
Goodwill
|
|
|
1,917 |
|
|
|
2,511 |
|
Intangible
Assets
|
|
|
187 |
|
|
|
128 |
|
Other
Assets
|
|
|
497 |
|
|
|
331 |
|
Total
Assets
|
|
$ |
10,595 |
|
|
$ |
10,850 |
|
|
|
|
|
|
|
|
|
|
Liabilities
and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
Current
debt
|
|
$ |
219 |
|
|
$ |
8 |
|
Trade
accounts payable
|
|
|
1,013 |
|
|
|
1,217 |
|
Other
current liabilities
|
|
|
761 |
|
|
|
878 |
|
Total
Current Liabilities
|
|
|
1,993 |
|
|
|
2,103 |
|
Long-Term
Debt
|
|
|
3,333 |
|
|
|
2,888 |
|
Deferred
Income Taxes
|
|
|
280 |
|
|
|
291 |
|
Other
Liabilities
|
|
|
539 |
|
|
|
525 |
|
Minority
Interest
|
|
|
98 |
|
|
|
29 |
|
Shareholders’
Equity:
|
|
|
|
|
|
|
|
|
Common
stock ($0.10 par value):
|
|
|
|
|
|
|
|
|
Class
A-authorized 900 million shares:
|
|
|
|
|
|
|
|
|
issued
322 million shares in both 2009 and 2008
|
|
|
32 |
|
|
|
32 |
|
Convertible
Class B-authorized 900 million shares:
|
|
|
|
|
|
|
|
|
issued
70 million shares in both 2009 and 2008
|
|
|
7 |
|
|
|
7 |
|
Capital
in excess of par value
|
|
|
2,180 |
|
|
|
2,161 |
|
Retained
earnings
|
|
|
2,409 |
|
|
|
3,006 |
|
Accumulated
other comprehensive income
|
|
|
(34 |
) |
|
|
41 |
|
|
|
|
4,594 |
|
|
|
5,247 |
|
Less
treasury stock, at cost-
|
|
|
|
|
|
|
|
|
16
million shares in 2009 and 15 million shares in 2008
|
|
|
242 |
|
|
|
233 |
|
Total
Shareholders’ Equity
|
|
|
4,352 |
|
|
|
5,014 |
|
Total
Liabilities and Shareholders’ Equity
|
|
$ |
10,595 |
|
|
$ |
10,850 |
|
See
accompanying notes.
|
|
|
|
|
|
|
|
|
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
Three
years ended October 3, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
in
millions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October
3, 2009
|
|
|
September
27, 2008
|
|
|
September
29, 2007
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A Common Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at beginning of year
|
|
|
322 |
|
|
$ |
32 |
|
|
|
300 |
|
|
$ |
30 |
|
|
|
284 |
|
|
$ |
28 |
|
Issuance
of Class A Common Stock
|
|
|
- |
|
|
|
- |
|
|
|
22 |
|
|
|
2 |
|
|
|
- |
|
|
|
- |
|
Conversion
from Class B shares
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
16 |
|
|
|
2 |
|
Balance
at end of year
|
|
|
322 |
|
|
|
32 |
|
|
|
322 |
|
|
|
32 |
|
|
|
300 |
|
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
B Common Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at beginning of year
|
|
|
70 |
|
|
|
7 |
|
|
|
70 |
|
|
|
7 |
|
|
|
86 |
|
|
|
9 |
|
Conversion
to Class A shares
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(16 |
) |
|
|
(2 |
) |
Balance
at end of year
|
|
|
70 |
|
|
|
7 |
|
|
|
70 |
|
|
|
7 |
|
|
|
70 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
in Excess of Par Value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at beginning of year
|
|
|
|
|
|
|
2,161 |
|
|
|
|
|
|
|
1,877 |
|
|
|
|
|
|
|
1,835 |
|
Issuance
of Class A Common Stock
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
272 |
|
|
|
|
|
|
|
- |
|
Convertible
note hedge transactions
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
(58 |
) |
|
|
|
|
|
|
- |
|
Warrant
transactions
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
44 |
|
|
|
|
|
|
|
- |
|
Stock
options exercised
|
|
|
|
|
|
|
(5 |
) |
|
|
|
|
|
|
(5 |
) |
|
|
|
|
|
|
9 |
|
Restricted
shares issued
|
|
|
|
|
|
|
(12 |
) |
|
|
|
|
|
|
(14 |
) |
|
|
|
|
|
|
(26 |
) |
Restricted
shares canceled
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
27 |
|
Restricted
share amortization
|
|
|
|
|
|
|
19 |
|
|
|
|
|
|
|
19 |
|
|
|
|
|
|
|
24 |
|
Reclassification
and other
|
|
|
|
|
|
|
15 |
|
|
|
|
|
|
|
24 |
|
|
|
|
|
|
|
8 |
|
Balance
at end of year
|
|
|
|
|
|
|
2,180 |
|
|
|
|
|
|
|
2,161 |
|
|
|
|
|
|
|
1,877 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
Earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at beginning of year
|
|
|
|
|
|
|
3,006 |
|
|
|
|
|
|
|
2,993 |
|
|
|
|
|
|
|
2,781 |
|
Cumulative
effect for adoption of new accounting guidance (1)
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
(17 |
) |
|
|
|
|
|
|
- |
|
Net
income (loss)
|
|
|
|
|
|
|
(537 |
) |
|
|
|
|
|
|
86 |
|
|
|
|
|
|
|
268 |
|
Dividends
paid
|
|
|
|
|
|
|
(60 |
) |
|
|
|
|
|
|
(56 |
) |
|
|
|
|
|
|
(56 |
) |
Balance
at end of year
|
|
|
|
|
|
|
2,409 |
|
|
|
|
|
|
|
3,006 |
|
|
|
|
|
|
|
2,993 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
Other Comprehensive Income (Loss), Net of Tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at beginning of year
|
|
|
|
|
|
|
41 |
|
|
|
|
|
|
|
50 |
|
|
|
|
|
|
|
17 |
|
Net hedging (gain)
loss recognized in earnings
|
|
|
|
|
|
|
36 |
|
|
|
|
|
|
|
(25 |
) |
|
|
|
|
|
|
(20 |
) |
Net
hedging unrealized gain (loss)
|
|
|
|
|
|
|
(30 |
) |
|
|
|
|
|
|
23 |
|
|
|
|
|
|
|
20 |
|
Loss
on investments reclassified to other income
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
- |
|
Unrealized
gain (loss) on investments
|
|
|
|
|
|
|
7 |
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
- |
|
Currency
translation adjustment gain reclassified to loss from discontinued
operation
|
|
|
|
|
|
|
(41 |
) |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
- |
|
Currency
translation adjustment
|
|
|
|
|
|
|
(40 |
) |
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
24 |
|
Net
change in postretirement liabilities
|
|
|
|
|
|
|
(10 |
) |
|
|
|
|
|
|
(4 |
) |
|
|
|
|
|
|
- |
|
Net
change in pension liability, prior to adoption of new accounting guidance
(1)
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
6 |
|
Adjustment
to initially apply new accounting guidance (1)
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
3 |
|
Balance
at end of year
|
|
|
|
|
|
|
(34 |
) |
|
|
|
|
|
|
41 |
|
|
|
|
|
|
|
50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury
Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at beginning of year
|
|
|
15 |
|
|
|
(233 |
) |
|
|
14 |
|
|
|
(226 |
) |
|
|
15 |
|
|
|
(230 |
) |
Purchase
of treasury shares
|
|
|
2 |
|
|
|
(19 |
) |
|
|
2 |
|
|
|
(30 |
) |
|
|
3 |
|
|
|
(61 |
) |
Stock
options exercised
|
|
|
- |
|
|
|
1 |
|
|
|
- |
|
|
|
11 |
|
|
|
(4 |
) |
|
|
65 |
|
Restricted
shares issued
|
|
|
(1 |
) |
|
|
12 |
|
|
|
(1 |
) |
|
|
16 |
|
|
|
(2 |
) |
|
|
27 |
|
Restricted
shares canceled
|
|
|
- |
|
|
|
(3 |
) |
|
|
- |
|
|
|
(4 |
) |
|
|
2 |
|
|
|
(27 |
) |
Balance
at end of year
|
|
|
16 |
|
|
|
(242 |
) |
|
|
15 |
|
|
|
(233 |
) |
|
|
14 |
|
|
|
(226 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Shareholders’ Equity
|
|
|
|
|
|
$ |
4,352 |
|
|
|
|
|
|
$ |
5,014 |
|
|
|
|
|
|
$ |
4,731 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
Income (Loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
|
|
|
|
$ |
(537 |
) |
|
|
|
|
|
$ |
86 |
|
|
|
|
|
|
$ |
268 |
|
Other
comprehensive income (loss), net of tax
|
|
|
|
|
|
|
(75 |
) |
|
|
|
|
|
|
(9 |
) |
|
|
|
|
|
|
30 |
|
Total
Comprehensive Income (Loss)
|
|
|
|
|
|
$ |
(612 |
) |
|
|
|
|
|
$ |
77 |
|
|
|
|
|
|
$ |
298 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Cumulative effect for adoption of new accounting guidance relates to: 2008
– uncertainty in income taxes; 2007 – defined benefit and post retirement
plans
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
Three
years ended October 3, 2009
|
|
|
|
in
millions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Cash
Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$ |
(537 |
) |
|
$ |
86 |
|
|
$ |
268 |
|
Adjustments
to reconcile net income (loss) to cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
445 |
|
|
|
468 |
|
|
|
482 |
|
Amortization
|
|
|
51 |
|
|
|
25 |
|
|
|
32 |
|
Deferred
taxes
|
|
|
(26 |
) |
|
|
35 |
|
|
|
5 |
|
Impairment
of goodwill
|
|
|
560 |
|
|
|
- |
|
|
|
- |
|
Impairment
and write-down of assets
|
|
|
32 |
|
|
|
57 |
|
|
|
14 |
|
Other,
net
|
|
|
68 |
|
|
|
26 |
|
|
|
(15 |
) |
(Increase)
decrease in accounts receivable
|
|
|
137 |
|
|
|
(59 |
) |
|
|
(66 |
) |
(Increase)
decrease in inventories
|
|
|
493 |
|
|
|
(376 |
) |
|
|
(166 |
) |
Increase
(decrease) in trade accounts payable
|
|
|
(148 |
) |
|
|
98 |
|
|
|
91 |
|
Increase
(decrease) in income taxes payable/receivable
|
|
|
33 |
|
|
|
(22 |
) |
|
|
24 |
|
Decrease
in interest payable
|
|
|
(60 |
) |
|
|
- |
|
|
|
(35 |
) |
Net
change in other current assets and liabilities
|
|
|
(23 |
) |
|
|
(50 |
) |
|
|
44 |
|
Cash
Provided by Operating Activities
|
|
|
1,025 |
|
|
|
288 |
|
|
|
678 |
|
Cash
Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
to property, plant and equipment
|
|
|
(368 |
) |
|
|
(425 |
) |
|
|
(285 |
) |
Proceeds
from sale of property, plant and equipment
|
|
|
9 |
|
|
|
26 |
|
|
|
76 |
|
Purchases
of marketable securities
|
|
|
(37 |
) |
|
|
(115 |
) |
|
|
(131 |
) |
Proceeds
from sale of marketable securities
|
|
|
56 |
|
|
|
112 |
|
|
|
147 |
|
Proceeds
from sale of investments
|
|
|
15 |
|
|
|
22 |
|
|
|
- |
|
Proceeds
from sale of short-term investment
|
|
|
- |
|
|
|
- |
|
|
|
770 |
|
Change
in restricted cash to be used for investing activities
|
|
|
(43 |
) |
|
|
- |
|
|
|
- |
|
Proceeds
from sale of discontinued operation
|
|
|
75 |
|
|
|
- |
|
|
|
- |
|
Acquisitions,
net of cash acquired
|
|
|
(93 |
) |
|
|
(17 |
) |
|
|
- |
|
Other,
net
|
|
|
(41 |
) |
|
|
(2 |
) |
|
|
2 |
|
Cash
Provided by (Used for) Investing Activities
|
|
|
(427 |
) |
|
|
(399 |
) |
|
|
579 |
|
Cash
Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
borrowings (payments) on revolving credit facilities
|
|
|
15 |
|
|
|
(213 |
) |
|
|
53 |
|
Payments
of debt
|
|
|
(380 |
) |
|
|
(147 |
) |
|
|
(1,263 |
) |
Net
proceeds from borrowings
|
|
|
852 |
|
|
|
449 |
|
|
|
- |
|
Net
proceeds from Class A stock offering
|
|
|
- |
|
|
|
274 |
|
|
|
- |
|
Convertible
note hedge transactions
|
|
|
- |
|
|
|
(94 |
) |
|
|
- |
|
Warrant
transactions
|
|
|
- |
|
|
|
44 |
|
|
|
- |
|
Purchase
of treasury shares
|
|
|
(19 |
) |
|
|
(30 |
) |
|
|
(61 |
) |
Dividends
|
|
|
(60 |
) |
|
|
(56 |
) |
|
|
(56 |
) |
Debt
issuance costs
|
|
|
(59 |
) |
|
|
- |
|
|
|
- |
|
Change
in restricted cash to be used for financing activities
|
|
|
(140 |
) |
|
|
- |
|
|
|
- |
|
Stock
options exercised
|
|
|
1 |
|
|
|
9 |
|
|
|
74 |
|
Change
in negative book cash balances
|
|
|
(65 |
) |
|
|
67 |
|
|
|
9 |
|
Other,
net
|
|
|
5 |
|
|
|
18 |
|
|
|
(8 |
) |
Cash
Provided by (Used for) Financing Activities
|
|
|
150 |
|
|
|
321 |
|
|
|
(1,252 |
) |
Effect
of Exchange Rate Change on Cash
|
|
|
6 |
|
|
|
(2 |
) |
|
|
9 |
|
Increase
in Cash and Cash Equivalents
|
|
|
754 |
|
|
|
208 |
|
|
|
14 |
|
Cash
and Cash Equivalents at Beginning of Year
|
|
|
250 |
|
|
|
42 |
|
|
|
28 |
|
Cash
and Cash Equivalents at End of Year
|
|
$ |
1,004 |
|
|
$ |
250 |
|
|
$ |
42 |
|
See
accompanying notes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1: BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business: Tyson
Foods, Inc. (collectively, “Company,” “we,” “us” or “our”), founded in 1935 with
world headquarters in Springdale, Arkansas, is one of the world’s largest
processor and marketer of chicken, beef and pork and the second-largest food
production company in the Fortune 500. We produce a
wide variety of brand name protein-based and prepared food products marketed in
the United States and approximately 90 countries around the world.
Consolidation: The
consolidated financial statements include the accounts of all wholly-owned
subsidiaries, as well as majority-owned subsidiaries for which we have a
controlling interest. All significant intercompany accounts and transactions
have been eliminated in consolidation.
We have
an investment in a joint venture, Dynamic Fuels LLC (Dynamic Fuels), in which we
have a 50 percent ownership interest. Dynamic Fuels qualifies as a variable
interest entity. Effective June 30, 2008, we began consolidating Dynamic
Fuels since we are the primary beneficiary.
Fiscal Year: We utilize a 52-
or 53-week accounting period ending on the Saturday closest to September 30. The
Company's accounting cycle resulted in a 53-week year for fiscal year 2009 and a
52-week year for fiscal years 2008 and 2007.
Reclassification: Certain
reclassifications were made to prior periods to conform to current presentations
in the Consolidated Financial Statements. The effect of these reclassifications
was not significant to the Consolidated Financial Statements.
Discontinued Operation: In
June 2008, we executed a letter of intent with XL Foods Inc. (XL Foods) to sell
the beef processing, cattle feed yard and fertilizer assets of three of our
Alberta, Canada subsidiaries (collectively, Lakeside), which were part of our
Beef segment. In March 2009, we completed the sale and sold these assets and
related inventories. The financial statements report Lakeside as a discontinued
operation. See Note 4: Discontinued Operation in the Notes to Consolidated
Financial Statements for further information.
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
our cash management activity. The carrying values of these assets approximate
their fair market values. We primarily utilize a cash management system with a
series of separate accounts consisting of lockbox accounts for receiving cash,
concentration accounts where funds are moved to, and several “zero-balance”
disbursement accounts for funding payroll, accounts payable, livestock
procurement, grower payments, etc. As a result of our cash management system,
checks issued, but not presented to the banks for payment, may result in
negative book cash balances. These negative book cash balances are included in
trade accounts payable and other current liabilities. At October 3, 2009, and
September 27, 2008, checks outstanding in excess of related book cash balances
totaled approximately $254 million and $322 million, respectively.
Accounts Receivable: We record
accounts receivable at net realizable value. This value includes an appropriate
allowance for estimated uncollectible accounts to reflect any loss anticipated
on the accounts receivable balances and charged to the provision for doubtful
accounts. We calculate this allowance based on our history of write-offs, level
of past due accounts and relationships with and economic status of our
customers. At October 3, 2009, and September 27, 2008, our allowance for
uncollectible accounts was $33 million and $12 million, respectively. We
generally do not have collateral for our receivables, but we do periodically
evaluate the credit worthiness of our customers.
Inventories: Processed
products, livestock and supplies and other are valued at the lower of cost or
market. Cost includes purchased raw materials, live purchase costs, growout
costs (primarily feed, contract grower pay and catch and haul costs), labor and
manufacturing and production overhead, which are related to the purchase and
production of inventories.
|
|
|
|
|
in
millions
|
|
|
|
2009
|
|
|
2008
|
|
Processed
products:
|
|
|
|
|
|
|
Weighted-average
method – chicken and prepared foods
|
|
$ |
629 |
|
|
$ |
920 |
|
First-in,
first-out method – beef and pork
|
|
|
414 |
|
|
|
571 |
|
Livestock
– first-in, first-out method
|
|
|
631 |
|
|
|
701 |
|
Supplies
and other – weighted-average method
|
|
|
335 |
|
|
|
346 |
|
Total
inventory, net
|
|
$ |
2,009 |
|
|
$ |
2,538 |
|
Property, Plant and Equipment:
Property, plant and equipment are stated at cost and primarily depreciated on a
straight-line method, using estimated lives for buildings and leasehold
improvements of 10 to 33 years, machinery and equipment of three to 12 years and
land improvements and other of three to 20 years. Major repairs and maintenance
costs that significantly extend the useful life of the related assets are
capitalized. Normal repairs and maintenance costs are charged to
operations.
We review
the carrying value of long-lived assets at each balance sheet date if indication
of impairment exists. Recoverability is assessed using undiscounted cash flows
based on historical results and current projections of earnings before interest
and taxes. We measure impairment as the excess of carrying cost over the fair
value of an asset. The fair value of an asset is measured using discounted cash
flows of future operating results based on a discount rate that corresponds to
our cost of capital.
Goodwill and Other Intangible
Assets: Goodwill and indefinite life intangible assets are initially
recorded at fair value and not amortized, but are reviewed for impairment at
least annually or more frequently if impairment indicators arise. Our goodwill
is allocated by reporting unit, and we follow a two-step process to evaluate if
a potential impairment exists. The first step is to identify if a potential
impairment exists by comparing the fair value of a reporting unit with its
carrying amount, including goodwill. If the fair value of a reporting unit
exceeds its carrying amount, goodwill of the reporting unit is not considered to
have a potential impairment and the second step of the impairment test is not
necessary. However, if the carrying amount of a reporting unit exceeds its fair
value, the second step is performed to determine if goodwill is impaired and to
measure the amount of impairment loss to recognize, if any. The second step
compares the implied fair value of goodwill with the carrying amount of
goodwill. If the implied fair value of goodwill exceeds the carrying amount,
then goodwill is not considered impaired. However, if the carrying amount of
goodwill exceeds the implied fair value, an impairment loss is recognized in an
amount equal to that excess. The implied fair value of goodwill is determined in
the same manner as the amount of goodwill recognized in a business combination
(i.e., the fair value of the reporting unit is allocated to all the assets and
liabilities, including any unrecognized intangible assets, as if the reporting
unit had been acquired in a business combination and the fair value of the
reporting unit was the purchase price paid to acquire the reporting unit). We
have elected to make the first day of the fourth quarter the annual impairment
assessment date for goodwill and other indefinite life intangible
assets.
We have
estimated the fair value of our reporting units using a discounted cash flow
analysis. This analysis requires us to make various judgmental estimates and
assumptions about sales, operating margins, growth rates and discount factors.
The recent disruptions in global credit and other financial markets and
deterioration of economic conditions led to an increase in our discount rate
used in the 2009 annual goodwill impairment analysis. There were no significant
changes in the other key assumptions and estimates. As a result of the increased
discount rate, we failed the first step of the 2009 goodwill impairment analysis
for our Beef reporting unit and performed the second step. The second step
resulted in a $560 million non-cash partial impairment of the Beef reporting
unit's goodwill. During fiscal 2009, 2008 and 2007, all of our reporting units
passed the first step of the goodwill impairment analysis, with the exception of
the Beef reporting unit during fiscal 2009.
While
estimating the fair value of our Beef and Chicken reporting units, we assumed
operating margins in future years in excess of the annual margins realized in
the most recent year. The fair value estimates for these reporting units assume
normalized operating margin assumptions and improved operating efficiencies
based on long-term expectations and operating margins historically realized in
the beef and chicken industries. Some of the inherent estimates and assumptions
used in determining fair value of the reporting units are outside the control of
management, including interest rates, cost of capital, tax rates, and our credit
ratings. While we believe we have made reasonable estimates and assumptions to
calculate the fair value of the reporting units, it is possible a material
change could occur. If our actual results are not consistent with our estimates
and assumptions used to calculate fair value, we may be required to perform the
second step in future years, which could result in additional material
impairments of our goodwill.
For our
other indefinite life intangible assets, if the carrying value of the intangible
asset exceeds its fair value, an impairment loss is recognized in an amount
equal to that excess. The fair value of trademarks is determined using a royalty
rate method based on expected revenues by trademark.
Investments: We have
investments in joint ventures and other entities. We use the cost method of
accounting where our voting interests are less than 20 percent and the equity
method of accounting where our voting interests are in excess of 20 percent, but
we do not have a controlling interest or a variable interest in which we are the
primary beneficiary. Investments in joint ventures and other entities are
reported in the Consolidated Balance Sheets in Other Assets.
We have
investments in marketable debt securities. As of October 3, 2009, and September
27, 2008, $81 million and $94 million, respectively, were classified in Other
Assets in the Consolidated Balance Sheets, with maturities ranging up to 47
years. We have determined all our marketable debt securities are
available-for-sale investments. These investments are reported at fair value
based on quoted market prices as of the balance sheet date, with unrealized
gains and losses, net of tax, recorded in other comprehensive income. The
amortized cost of debt securities is adjusted for amortization of premiums and
accretion of discounts to maturity. Such
amortization
is recorded in interest income. The cost of securities sold is based on the
specific identification method. Realized gains and losses on the sale of debt
securities and declines in value judged to be other than temporary are recorded
on a net basis in other income. Interest and dividends on securities classified
as available-for-sale are recorded in interest income.
Accrued Self Insurance: We use
a combination of insurance and self-insurance mechanisms in an effort to
mitigate the potential liabilities for health and welfare, workers’
compensation, auto liability and general liability risks. Liabilities associated
with our risks retained are estimated, in part, by considering claims
experience, demographic factors, severity factors and other actuarial
assumptions.
Capital Stock: We have two
classes of capital stock, Class A Common Stock, $0.10 par value (Class A stock)
and Class B Common Stock, $0.10 par value (Class B stock). Holders of Class B
stock may convert such stock into Class A stock on a share-for-share basis.
Holders of Class B stock are entitled to 10 votes per share, while holders of
Class A stock are entitled to one vote per share on matters submitted to
shareholders for approval. As of October 3, 2009, members of the Tyson family
beneficially own, in the aggregate, 99.97% of the outstanding shares of Class B
stock and 2.36% of the outstanding shares of Class A stock, giving the Tyson
family control of approximately 70% of the total voting power of the outstanding
voting stock. Cash dividends cannot be paid to holders of Class B stock unless
they are simultaneously paid to holders of Class A stock. 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. We pay quarterly
cash dividends to Class A and Class B shareholders. We paid Class A dividends
per share of $0.16 and Class B dividends per share of $0.144 in each of fiscal
years 2009, 2008 and 2007.
The Class
B stock is considered a participating security requiring the use of the
two-class method for the computation of basic earnings per share. The two-class
computation method for each period reflects the cash dividends paid for each
class of stock, plus the amount of allocated undistributed earnings (losses)
computed using the participation percentage, which reflects the dividend rights
of each class of stock. Basic earnings per share were computed using the
two-class method for all periods presented. The shares of Class B stock are
considered to be participating convertible securities since the shares of Class
B stock are convertible on a share-for-share basis into shares of Class A stock.
Diluted earnings per share were computed assuming the conversion of the Class B
shares into Class A shares as of the beginning of each period.
Financial Instruments: We
purchase certain commodities, such as grains and livestock in the course of
normal operations. As part of our commodity risk management activities, we use
derivative financial instruments, primarily futures and options, to reduce our
exposure to various market risks related to these purchases, as well as to
changes in foreign currency exchange rates. Contract terms of a financial
instrument qualifying as a hedge instrument closely mirror those of the hedged
item, providing a high degree of risk reduction and correlation. Contracts
designated and highly effective at meeting risk reduction and correlation
criteria are recorded using hedge accounting. If a derivative instrument is
accounted for as a hedge, changes in the fair value of the instrument will be
offset either against the change in fair value of the hedged assets, liabilities
or firm commitments through earnings or recognized in other comprehensive income
(loss) until the hedged item is recognized in earnings. The ineffective portion
of an instrument’s change in fair value is immediately recognized in earnings as
a component of cost of sales. Instruments we hold as part of our risk management
activities that do not meet the criteria for hedge accounting are marked to fair
value with unrealized gains or losses reported currently in earnings. Changes in
market value of derivatives used in our risk management activities relating to
forward sales contracts are recorded in sales. Changes in market value of
derivatives used in our risk management activities surrounding inventories on
hand or anticipated purchases of inventories or supplies are recorded in cost of
sales. We generally do not hedge anticipated transactions beyond 18
months.
Revenue Recognition: We
recognize revenue when title and risk of loss are transferred to customers,
which is generally on delivery based on terms of sale. Revenue is recognized as
the net amount estimated to be received after deducting estimated amounts for
discounts, trade allowances and product terms.
Litigation Reserves: There are
a variety of legal proceedings pending or threatened against us. Accruals are
recorded when it is probable a liability has been incurred and the amount of the
liability can be reasonably estimated based on current law, progress of each
case, opinions and views of legal counsel and other advisers, our experience in
similar matters and intended response to the litigation. These amounts, which
are not discounted and are exclusive of claims against third parties, are
adjusted periodically as assessment efforts progress or additional information
becomes available. We expense amounts for administering or litigating claims as
incurred. Accruals for legal proceedings are included in Other current
liabilities in the Consolidated Balance Sheets.
Freight Expense: Freight
expense associated with products shipped to customers is recognized in cost of
sales.
Advertising and Promotion
Expenses: Advertising and promotion expenses are charged to operations in
the period incurred. Customer incentive and trade promotion activities are
recorded as a reduction to sales based on amounts estimated as being due to
customers, based primarily on historical utilization and redemption rates, while
other advertising and promotional activities are recorded as selling, general
and administrative expenses. Advertising and promotion expenses for fiscal years
2009, 2008 and 2007 were $491 million, $495 million and $467 million,
respectively.
Use of Estimates: The
consolidated financial statements are prepared in conformity with accounting
principles generally accepted in the United States, which require us 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.
Recently Issued Accounting
Pronouncements: In December 2007, the Financial Accounting Standards
Board (FASB) issued guidance to establish accounting and reporting standards for
a noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. This guidance clarifies that a noncontrolling interest in a
subsidiary is an ownership interest in the consolidated entity and may be
reported as equity in the consolidated financial statements, rather than in the
liability or mezzanine section between liabilities and equity. This guidance
also requires consolidated net income be reported at amounts that include the
amounts attributable to both the parent and the noncontrolling interest. This
statement is not expected to have a material impact on our consolidated
financial statements; however, certain financial statement presentation changes
and additional required disclosures will be made. The guidance is effective for
fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2008; therefore, we will adopt at the beginning of fiscal
2010.
In
December 2007, the FASB issued guidance establishing principles and requirements
for how an acquirer in a business combination: 1) recognizes and measures in its
financial statements identifiable assets acquired, liabilities assumed, and any
noncontrolling interest in the acquiree; 2) recognizes and measures goodwill
acquired in a business combination or a gain from a bargain purchase; and 3)
determines what information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of a business
combination. This guidance is effective for business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008; therefore, we will adopt this
guidance for any business combinations entered into beginning in fiscal
2010.
In May
2008, the FASB issued guidance which specifies issuers of convertible debt
instruments that may be settled in cash upon conversion (including partial cash
settlement) should separately account for the liability and equity components in
a manner that will reflect the entity’s nonconvertible debt borrowing rate when
interest cost is recognized in subsequent periods. The amount allocated to the
equity component represents a discount to the debt, which is amortized into
interest expense using the effective interest method over the life of the debt.
This guidance is effective for financial statements issued for fiscal years
beginning after December 15, 2008, and interim periods within those fiscal
years. Early adoption is not permitted. We will adopt the provisions of this
guidance beginning in the first quarter of fiscal 2010. The provisions are
required to be applied retrospectively to all periods presented. Upon
retrospective adoption, our effective interest rate on our 3.25% Convertible
Senior Notes due 2013 will be 8.26%, which would result in the recognition of a
$92 million discount to these notes with the offsetting after tax amount of $56
million recorded to capital in excess of par value. This discount will be
accreted over the five-year term of the convertible notes at the effective
interest rate, which will not materially impact fiscal 2008 interest expense,
but will result in an estimated $17 million non-cash increase to our reported
fiscal year 2009 interest expense.
In
December 2008, the FASB issued guidance requiring additional disclosures about
assets held in an employer’s defined benefit pension or other postretirement
plan. This guidance is effective for fiscal years ending after December 15,
2009, with early adoption permitted. We will adopt the disclosure requirements
beginning with our fiscal 2010 annual report.
In June
2009, the FASB issued guidance removing the concept of a qualifying
special-purpose entity (QSPE). This guidance also clarifies the requirements for
isolation and limitations on portions of financial assets eligible for sale
accounting. This guidance is effective for fiscal years beginning after November
15, 2009. Accordingly, we will adopt this guidance in fiscal year 2011. We are
in process of evaluating the potential impacts.
In June
2009, the FASB issued guidance requiring an analysis to determine whether a
variable interest gives the entity a controlling financial interest in a
variable interest entity. This guidance requires an ongoing reassessment and
eliminates the quantitative approach previously required for determining whether
an entity is the primary beneficiary. This guidance is effective for fiscal
years beginning after November 15, 2009. Accordingly, we will adopt this
guidance in fiscal year 2011. We are in process of evaluating the potential
impacts.
Subsequent Events: We have
evaluated subsequent events through the time of filing on November 23, 2009,
which represents the date the Consolidated Financial Statements were
issued.
NOTE
2: CHANGE IN ACCOUNTING PRINCIPLES
In
September 2006, the FASB issued guidance for using fair value to measure assets
and liabilities. This guidance also requires expanded information about the
extent to which companies measure assets and liabilities at fair value, the
information used to measure fair value and the effect of fair value measurements
on earnings. This guidance applies whenever other standards require (or
permit)
assets or
liabilities to be measured at fair value. At the beginning of fiscal 2009, we
partially adopted this standard, as allowed, which delayed the effective date
for nonfinancial assets and liabilities. As of the beginning of fiscal 2009, we
applied these provisions to our financial instruments and the impact was not
material. We will be required to apply fair value measurements to our
nonfinancial assets and liabilities at the beginning of fiscal 2010. The
adoption did not have a significant impact on our consolidated financial
statements.
In
February 2007, the FASB issued guidance providing companies with an option to
report selected financial assets and liabilities, firm commitments, and
nonfinancial warranty and insurance contracts at fair value on a
contract-by-contract basis, with changes in fair value recognized in earnings
each reporting period. When adopted at the beginning of fiscal 2009, we did not
elect this fair value option and, therefore, there was no impact to our
consolidated financial statements.
In April
2007, the FASB issued guidance which requires entities that offset the fair
value amounts recognized for derivative receivables and payables to also offset
the fair value amounts recognized for the right to reclaim cash collateral with
the same counterparty under a master netting agreement. We applied the
provisions of this guidance to our consolidated financial statements beginning
in fiscal 2009. We did not restate prior periods as the impact was not
material.
In March
2008, the FASB issued guidance for disclosures about derivative instruments and
hedging activities. This guidance establishes enhanced disclosure requirements
about: 1) how and why an entity uses derivative instruments; 2) how derivative
instruments and related hedged items are accounted for; and 3) how derivative
instruments and related hedged items affect an entity’s financial position,
financial performance and cash flows. This guidance was effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008; therefore, we adopted in fiscal 2009. See Note 6: Derivative Financial
Instruments for required disclosures.
In April
2009, the FASB issued guidance regarding the recognition and presentation of
other-than-temporary impairments. This standard provides new guidance on the
recognition and presentation of an other-than-temporary impairment for debt
securities classified as available-for-sale and held-to-maturity and provides
certain new disclosure requirements for both debt and equity securities. This
standard was effective for interim and annual periods ending after June 15,
2009, with early adoption permitted for periods ending after March 15, 2009. We
adopted in fiscal 2009. The adoption did not have a significant impact on our
consolidated financial statements.
In April
2009, the FASB issued additional guidance for estimating the fair value of
assets and liabilities in markets that have experienced a significant reduction
in volume and activity in relation to normal activity. This guidance was
effective for interim and annual periods ending after June 15, 2009, with early
adoption permitted for periods ending after March 15, 2009. We adopted in fiscal
2009. The adoption did not have a significant impact on our consolidated
financial statements.
In April
2009, the FASB issued guidance to require disclosures about fair value of
financial instruments in interim financial statements. This guidance was
effective for interim periods ending after June 15, 2009, with early adoption
permitted for periods ending after March 15, 2009. We adopted this guidance
during fiscal 2009 and made the required disclosures during our applicable
interim reports.
In May
2009, the FASB issued guidance establishing general standards of accounting for
and disclosure of events that occur after the balance sheet date but before
financial statements are issued. This standard was effective for interim and
annual periods ending after June 15, 2009. We adopted this guidance in fiscal
2009. See “Subsequent Events” in Note 1: Business and Summary of Significant
Accounting Policies for required disclosures.
NOTE
3: ACQUISITIONS
In August
2009, we completed the establishment of related joint ventures in China referred
to as Shandong Tyson Xinchang Foods. The aggregate purchase price for our 60%
equity interest was $21 million, which excludes $93 million of cash transferred
to the joint venture for future capital needs. The preliminary purchase price
included $29 million allocated to Intangible Assets and $19 million allocated to
Goodwill, as well as the assumption of $76 million of Current and Long-Term
Debt.
In
October 2008, we acquired three vertically integrated poultry companies in
southern Brazil: Macedo Agroindustrial, Avicola Itaiopolis and Frangobras. The
aggregate purchase price was $67 million, including $4 million of mandatory
deferred payments to be made through fiscal 2011. In addition, we have $15
million of contingent purchase price based on production volumes payable through
fiscal 2011. The purchase price included $23 million allocated to Goodwill and
$19 million allocated to Intangible Assets.
NOTE
4: DISCONTINUED OPERATION
In June
2008, we executed a letter of intent with XL Foods to sell the beef processing,
cattle feed yard and fertilizer assets of three of our Alberta, Canada
subsidiaries (collectively, Lakeside), which were part of our Beef segment. On
March 13, 2009, we completed the sale and sold these assets and related
inventories for total consideration of $145 million, based on exchange rates
then in effect. This included (a) cash received at closing of $43 million, (b)
$78 million of collateralized notes receivable from either XL Foods or an
affiliated entity to be collected throughout the two years following closing,
and (c) $24 million of XL Foods Preferred Stock to be redeemed over the next
five years.
We
recorded a pretax loss on sale of Lakeside of $10 million in fiscal 2009, which
included an allocation of beef reporting unit goodwill of $59 million and
cumulative currency translation adjustment gains of $41 million.
The
following is a summary of Lakeside’s operating results (in
millions):
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Sales
|
|
$ |
461 |
|
|
$ |
1,268 |
|
|
$ |
1,171 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pretax
income from discontinued operation
|
|
$ |
20 |
|
|
$ |
- |
|
|
$ |
- |
|
Loss
on sale of discontinued operation
|
|
|
(10 |
) |
|
|
- |
|
|
|
- |
|
Income
tax expense
|
|
|
11 |
|
|
|
- |
|
|
|
- |
|
Loss
from discontinued operation
|
|
$ |
(1 |
) |
|
$ |
- |
|
|
$ |
- |
|
The
carrying amounts of Lakeside’s assets held for sale included the following (in
millions):
|
|
September
27, 2008
|
|
Assets
of discontinued operation held for sale:
|
|
|
|
Inventories
|
|
$ |
82 |
|
Net
property, plant and equipment
|
|
|
77 |
|
Total
assets of discontinued operation held for sale
|
|
$ |
159 |
|
NOTE
5: DISPOSITIONS AND OTHER CHARGES
In March
2009, we announced the decision to close our Ponca City, Oklahoma, processed
meats plant. The plant ceased operations in August 2009. The closing resulted in
the elimination of approximately 600 jobs. During fiscal 2009, we recorded
charges of $15 million, which included $14 million for impairment charges and $1
million of employee termination benefits. The charges are reflected in the
Prepared Foods segment’s Operating Income and included in the Consolidated
Statements of Income in Other Charges. No material adjustments to the accrual
are anticipated.
In fiscal
2008, we recorded charges of $10 million related to intangible asset
impairments. Of this amount, $8 million is reflected in the Beef segment’s
Operating Income and $2 million in the Prepared Foods segment’s Operating
Income, and both are recorded in the Consolidated Statements of Income in Cost
of Sales. We recorded charges of $7 million related to flood damage at our
Jefferson, Wisconsin, plant. This amount is reflected in the Prepared Foods
segment’s Operating Income and included in the Consolidated Statements of Income
in Cost of Sales. We also recorded a charge of $6 million related to the
impairment of unimproved real property in Memphis, Tennessee. This amount is
reflected in the Chicken segment’s Operating Income (Loss) and included in the
Consolidated Statements of Income in Cost of Sales. Additionally, we recorded an
$18 million non-operating gain as the result of a private equity firm’s purchase
of a technology company in which we held a minority interest. This gain was
recorded in Other Income in the Consolidated Statements of Income.
In
February 2008, we announced discontinuation of an existing product line and
closing of one of our three poultry plants in Wilkesboro, North Carolina. The
Wilkesboro cooked products plant ceased operations in April 2008. The closure
resulted in elimination of approximately 400 jobs. In fiscal 2008, we recorded
charges of $13 million for impairment charges. This amount is reflected in the
Chicken segment’s Operating Income (Loss) and included in the Consolidated
Statements of Income in Other Charges.
In
January 2008, we announced the decision to restructure operations at our
Emporia, Kansas, beef plant. Beef slaughter operations ceased during the second
quarter of fiscal 2008. However, the facility is still used to process certain
commodity, specialty cuts and ground beef, as well as a cold storage and
distribution warehouse. This restructuring resulted in elimination of
approximately 1,700 jobs at the Emporia plant. In fiscal 2008, we recorded
charges of $10 million for impairment charges and $7 million of other closing
costs, consisting of $6 million for employee termination benefits and $1 million
in other plant-closing related liabilities. These amounts were reflected in the
Beef segment’s Operating Income (Loss) and included in the Consolidated
Statements of Income in Other Charges. We have fully paid employee termination
benefits and other plant-closing related liabilities.
In fiscal
2008, management approved plans for implementation of certain recommendations
resulting from the previously announced FAST initiative, which was focused on
process improvement and efficiency creation. As a result, in fiscal 2008, we
recorded charges of $6 million related to employee termination benefits
resulting from termination of approximately 200 employees. Of these charges, $2
million, $2 million, $1 million and $1 million, respectively, were recorded in
the Chicken, Beef, Pork and Prepared Foods segments’ Operating Income (Loss) and
included in the Consolidated Statements of Income in Other Charges. We have
fully paid the employee termination benefits.
In May
2007, we announced the completion of the sale of two of our Alabama poultry
plants and related support facilities. As part of strategic efforts to reduce
the production of commodity chicken, we sold our processing plants in Ashland
and Gadsden, which also included a nearby feed mill and two hatcheries. These
facilities employed approximately 1,200 employees, of which approximately 800
were hired by the acquiring company, while the remaining employees were offered
the opportunity to transfer to our other operations in Alabama. We recorded a
gain of $10 million on the sale in fiscal 2007. The gain was recorded in the
Chicken segment’s Operating Income (Loss) and included in the Consolidated
Statements of Income in Cost of Sales.
NOTE
6: DERIVATIVE FINANCIAL INSTRUMENTS
Our
business operations give rise to certain market risk exposures mostly due to
changes in commodity prices, foreign currency exchange rates and interest rates.
We manage a portion of these risks through the use of derivative financial
instruments, primarily futures and options, to reduce our exposure to commodity
price risk, foreign currency risk and interest rate risk. Forward contracts on
various commodities, including grains, livestock and energy, are primarily
entered into to manage the price risk associated with forecasted purchases of
these inputs used in our production processes. Foreign exchange forward
contracts are entered into to manage the fluctuations in foreign currency
exchange rates, primarily as a result of certain receivable and payable
balances. We also periodically utilize interest rate swaps to manage interest
rate risk associated with our variable-rate borrowings.
Our risk
management programs are reviewed by our Board of Directors’ Audit Committee.
These programs are monitored by senior management and may be revised as market
conditions dictate. Our current risk management programs utilize
industry-standard models that take into account the implicit cost of hedging.
Risks associated with our market risks and those created by derivative
instruments and the fair values are strictly monitored at all times,
using value-at-risk and stress tests. Credit risks associated with
our derivative contracts are not significant as we minimize counterparty
concentrations, utilize margin accounts or letters of credit, and primarily deal
with counterparties with solid credit. Additionally, our derivative contracts
are mostly short-term in duration and we do not make use of credit-risk-related
contingent features. No significant concentrations of credit risk existed at
October 3, 2009.
We
recognize all derivative instruments as either assets or liabilities at fair
value in the Consolidated Balance Sheets, with the exception of normal purchases
and normal sales expected to result in physical delivery. The
accounting for changes in the fair value (i.e., gains or losses) of a derivative
instrument depends on whether it has been designated and qualifies as part of a
hedging relationship and the type of hedging relationship. For those derivative
instruments that are designated and qualify as hedging instruments, we designate
the hedging instrument based upon the exposure being hedged (i.e., fair value
hedge, cash flow hedge, or hedge of a net investment in a foreign operation). We
qualify, or designate, a derivative financial instrument as a hedge when
contract terms closely mirror those of the hedged item, providing a high degree
of risk reduction and correlation. If a derivative instrument is accounted for
as a hedge, depending on the nature of the hedge, changes in the fair value of
the instrument either will be offset against the change in fair value of the
hedged assets, liabilities or firm commitments through earnings, or be
recognized in other comprehensive income (loss) until the hedged item is
recognized in earnings. The ineffective portion of an instrument’s change in
fair value is recognized in earnings immediately. We designate certain forward
contracts as follows:
|
●
|
Cash
Flow Hedges – include certain commodity forward contracts of forecasted
purchases (i.e., grains) and certain foreign exchange forward
contracts.
|
|
●
|
Fair
Value Hedges – include certain commodity forward contracts of forecasted
purchases (i.e., livestock).
|
|
●
|
Net
Investment Hedges – include certain foreign currency forward contracts of
permanently invested capital in certain foreign
subsidiaries.
|
Cash flow
hedges
Derivative
instruments, such as futures and options, are designated as hedges against
changes in the amount of future cash flows related to procurement of certain
commodities utilized in our production processes. We do not purchase forward
commodity contracts in excess of our physical consumption requirements and
generally do not hedge forecasted transactions beyond 12 months. The objective
of these hedges is to reduce the variability of cash flows associated with the
forecasted purchase of those commodities. For the derivative
instruments we designate and qualify as a cash flow hedge, the effective portion
of the gain or loss on the derivative is reported as a component of other
comprehensive income (OCI) and reclassified into earnings in the same period or
periods during which the hedged transaction affects earnings. Gains and losses
representing hedge ineffectiveness are recognized in earnings in the current
period. Ineffectiveness related to our cash flow hedges was not significant
during fiscal 2009, 2008 and 2007.
As of
October 3, 2009, we had the following aggregated notionals of outstanding
forward contracts accounted for as cash flow hedges:
|
Notional
Volume
|
Commodity:
|
|
Corn
|
4
million bushels
|
Soy
meal
|
16,900
tons
|
The net
amount of pretax losses in accumulated OCI as of October 3, 2009, expected to be
reclassified into earnings within the next 12 months was $3 million. During
fiscal 2009, 2008 and 2007, we did not reclassify any pretax gains/losses into
earnings as a result of the discontinuance of cash flow hedges due to the
probability the original forecasted transaction would not occur by the end of
the originally specified time period or within the additional period of time
allowed by generally accepted accounting principles.
The
following table sets forth the pretax impact of cash flow hedge derivative
instruments on the Consolidated Statements of Income (in millions):
|
|
Gain/(Loss)
|
|
Consolidated
|
|
Gain/(Loss)
|
|
|
|
Recognized
in OCI
|
|
Statements
of Income
|
|
Reclassified
from
|
|
|
|
on
Derivatives
|
|
Classification
|
|
OCI
to Earnings
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Cash
Flow Hedge - Derivatives designated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
as
hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity
contracts
|
|
$ |
(61 |
) |
|
$ |
39 |
|
|
$ |
33 |
|
Cost
of Sales
|
|
$ |
(67 |
) |
|
$ |
42 |
|
|
$ |
34 |
|
Foreign
exchange contracts
|
|
|
8 |
|
|
|
(2 |
) |
|
|
- |
|
Other
Income/Expense
|
|
|
6 |
|
|
|
- |
|
|
|
- |
|
Total
|
|
$ |
(53 |
) |
|
$ |
37 |
|
|
$ |
33 |
|
|
|
$ |
(61 |
) |
|
$ |
42 |
|
|
$ |
34 |
|
Fair value
hedges
We
designate certain futures contracts as fair value hedges of firm commitments to
purchase livestock for slaughter. Our objective of these hedges is to minimize
the risk of changes in fair value created by fluctuations in commodity prices
associated with fixed price livestock firm commitments. As of October 3, 2009,
we had the following aggregated notionals of outstanding forward contracts
entered into to hedge forecasted commodity purchases which are accounted for as
a fair value hedge:
|
Notional
Volume
|
Commodity:
|
|
Live
Cattle
|
133 million
pounds
|
Lean
Hogs
|
171 million
pounds
|
For these
derivative instruments we designate and qualify as a fair value hedge, the gain
or loss on the derivative, as well as the offsetting gain or loss on the hedged
item attributable to the hedged risk, are recognized in earnings in the current
period. We include the gain or loss on the hedged items (i.e.,
livestock purchase firm commitments) in the same line item, cost of sales, as
the offsetting gain or loss on the related livestock forward
position.
|
|
in
millions
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
Statements
of Income
|
|
|
|
|
|
|
|
|
|
|
Classification
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Gain/(loss)
on forwards
|
Cost
of Sales
|
|
$ |
152 |
|
|
$ |
65 |
|
|
$ |
(13 |
) |
Gain/(loss)
on purchase contract
|
Cost
of Sales
|
|
|
(152 |
) |
|
|
(65 |
) |
|
|
13 |
|
Ineffectiveness
related to our fair value hedges was not significant during fiscal 2009, 2008
and 2007.
Foreign net investment
hedges
We
utilize forward foreign exchange contracts to protect the value of our net
investments in certain foreign subsidiaries. For derivative instruments that are
designated and qualify as a hedge of a net investment in a foreign currency, the
gain or loss is reported in OCI as part of the cumulative translation adjustment
to the extent it is effective, with the related amounts due to or from
counterparties included in other liabilities or other assets. We utilize the
forward-rate method of assessing hedge effectiveness. Any ineffective
portions of net investment hedges are recognized in the Consolidated Statements
of Income during the period of change. Ineffectiveness related to our foreign
net investment hedges was not significant during fiscal 2009, 2008 and 2007. As
of October 3, 2009, we had no forward foreign currency contracts accounted for
as foreign net investment hedges.
The
following table sets forth the pretax impact of these derivative instruments on
the Consolidated Statements of Income (in millions):
|
Gain/(Loss)
|
Consolidated
|
Gain/(Loss)
|
|
Recognized
in OCI
|
Statements
of Income
|
Reclassified
from
|
|
on
Derivatives
|
Classification
|
OCI
to Earnings
|
|
2009
|
2008
|
2007
|
|
2009
|
2008
|
2007
|
Net
Investment Hedge - Derivatives
|
|
|
|
|
|
|
|
designated
as hedging instruments:
|
|
|
|
|
|
|
|
Foreign
exchange contracts
|
$(5)
|
$-
|
$-
|
Other
Income/Expense
|
$(2)
|
$-
|
$-
|
|
1.
|
Amounts
reclassified from OCI relate to the sale of our Lakeside discontinued
operation; amounts related to hedge ineffectiveness were not
significant.
|
Undesignated
positions
In
addition to our designated positions, we also hold forward and option contracts
for which we do not apply hedge accounting. These include certain derivative
instruments related to commodities price risk, including grains, livestock and
energy, foreign currency risk and interest rate risk. We mark these positions to
fair value through earnings at each reporting date. We generally do not enter
into undesignated positions beyond 18 months. Our undesignated positions
primarily include grains, energy, livestock and foreign currency forwards and
options.
The
objective of our undesignated grains, energy and livestock commodity positions
is to reduce the variability of cash flows associated with the forecasted
purchase of certain grains, energy and livestock inputs to our production
processes. We also enter into certain forward sales of boxed beef and boxed pork
and forward purchases of cattle and hogs at fixed prices. The fixed price sales
contracts lock in the proceeds from a sale in the future and the fixed cattle
and hog purchases lock in the cost. However, the cost of the livestock and the
related boxed beef and boxed pork market prices at the time of the sale or
purchase could vary from this fixed price. As we enter into fixed forward sales
of boxed beef and boxed pork and forward purchases of cattle and hogs, we also
enter into the appropriate number of livestock futures positions to mitigate a
portion of this risk. Changes in market value of the open livestock futures
positions are marked to market and reported in earnings at each reporting date,
even though the economic impact of our fixed prices being above or below the
market price is only realized at the time of sale or purchase. These positions
generally do not qualify for hedge treatment due to location basis differences
between the commodity exchanges and the actual locations when we purchase the
commodities.
We have a
foreign currency cash flow hedging program to hedge portions of forecasted
transactions denominated in foreign currencies, primarily with forward
contracts, to protect against the reduction in value of forecasted foreign
currency cash flows. Our undesignated foreign currency positions
generally would qualify for cash flow hedge accounting. However, to
reduce earnings volatility, we normally will not elect hedge accounting
treatment when the position provides an offset to the underlying related
transaction.
The
objective of our undesignated interest rate swap is to manage interest rate risk
exposure on a floating-rate bond. Our interest rate swap agreement effectively
modifies our exposure to interest rate risk by converting a portion of the
floating-rate bond to a fixed rate basis for the first five years, thus reducing
the impact of the interest-rate changes on future interest expense. This
interest rate swap does not qualify for hedge treatment due to differences in
the underlying bond and swap contract interest-rate indices.
As of
October 3, 2009, we had the following aggregate outstanding notionals related to
our undesignated positions:
|
Notional
Volume
|
Commodity:
|
|
Corn
|
11
million bushels
|
Soy
meal
|
73,000 tons
|
Live
Cattle
|
82
million pounds
|
Lean
Hogs
|
11
million pounds
|
Natural
Gas
|
850
billion British Thermal Units
|
Foreign
Currency
|
$124
million United States dollars
|
Interest
Rate
|
$64
million average monthly notional
debt
|
Included
in our undesignated positions are certain commodity grain positions (which do
not qualify for hedge treatment) we enter into to manage the risk of costs
associated with forward sales to certain customers for which sales prices are
determined under cost-plus arrangements. These unrealized positions totaled
losses of $17 million and $24 million at October 3, 2009, and September 27,
2008, respectively. When these positions are liquidated, we expect any realized
gains or losses will be reflected in the prices of the poultry products sold.
Since these derivative positions do not qualify for hedge treatment, they
initially create volatility in our earnings associated with changes in fair
value. However, once the positions are liquidated and included in the sales
price to the customer, there is ultimately no earnings impact as any
previous fair value gains or losses are included in the prices of the
poultry products.
The
following table sets forth the pretax impact of the undesignated derivative
instruments on the Consolidated Statements of Income (in millions):
|
Consolidated
|
|
Gain/(Loss)
|
|
|
Statements
of Income
|
|
Recognized
|
|
|
Classification
|
|
in
Earnings
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Derivatives
not designated
|
|
|
|
|
|
|
|
|
|
|
as
hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
Commodity
contracts
|
Sales
|
|
$ |
(34 |
) |
|
$ |
(12 |
) |
|
$ |
14 |
|
Commodity
contracts
|
Cost
of Sales
|
|
|
(151 |
) |
|
|
259 |
|
|
|
40 |
|
Foreign
exchange contracts
|
Other
Income/Expense
|
|
|
- |
|
|
|
1 |
|
|
|
1 |
|
Interest
rate contracts
|
Interest
Expense
|
|
|
(4 |
) |
|
|
- |
|
|
|
- |
|
Total
|
|
|
$ |
(189 |
) |
|
$ |
248 |
|
|
$ |
55 |
|
The
following table sets forth the fair value of all derivative instruments
outstanding in the Consolidated Balance Sheets (in millions):
|
|
|
Fair
Value
|
|
|
Balance
Sheet
|
|
|
|
|
|
|
|
Classification
|
|
2009
|
|
|
2008
|
|
Derivative
Assets:
|
|
|
|
|
|
|
|
Derivatives
designated as hedging instruments:
|
|
|
|
|
|
|
|
Commodity
contracts
|
Other
current assets
|
|
$ |
12 |
|
|
$ |
29 |
|
|
|
|
|
|
|
|
|
|
|
Derivatives
not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
Commodity
contracts
|
Other
current assets
|
|
|
9 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
Total
derivative assets
|
|
|
$ |
21 |
|
|
$ |
29 |
|
|
|
|
|
|
|
|
|
|
|
Derivative
Liabilities:
|
|
|
|
|
|
|
|
|
|
Derivatives
designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
Commodity
contracts
|
Other
current liabilities
|
|
$ |
2 |
|
|
$ |
34 |
|
Foreign
exchange contracts
|
Other
current liabilities
|
|
|
- |
|
|
|
2 |
|
Total
derivative liabilities – designated
|
|
|
|
2 |
|
|
|
36 |
|
|
|
|
|
|
|
|
|
|
|
Derivatives
not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
Commodity
contracts
|
Other
current liabilities
|
|
|
13 |
|
|
|
7 |
|
Foreign
exchange contracts
|
Other
current liabilities
|
|
|
1 |
|
|
|
2 |
|
Interest
rate contracts
|
Other
current liabilities
|
|
|
4 |
|
|
|
- |
|
Total
derivative liabilities – not designated
|
|
|
|
18 |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
Total
derivative liabilities
|
|
|
$ |
20 |
|
|
$ |
45 |
|
|
1.
|
Beginning
in fiscal 2009, our derivative assets and liabilities are presented in our
Consolidated Balance Sheets on a net basis. We net derivative assets and
liabilities, including cash collateral when a legally enforceable master
netting arrangement exists between the counterparty to a derivative
contract and us. See Note 12: Fair Value Measurements for a reconciliation
to amounts reported in the Consolidated Balance Sheet. We did not restate
fiscal 2008 balances as the impact was not
material.
|
NOTE
7: PROPERTY, PLANT AND EQUIPMENT
Major
categories of property, plant and equipment and accumulated depreciation at
October 3, 2009, and September 27, 2008:
|
|
|
|
|
in
millions
|
|
|
|
2009
|
|
|
2008
|
|
Land
|
|
$ |
96 |
|
|
$ |
89 |
|
Building
and leasehold improvements
|
|
|
2,570 |
|
|
|
2,440 |
|
Machinery
and equipment
|
|
|
4,640 |
|
|
|
4,382 |
|
Land
improvements and other
|
|
|
227 |
|
|
|
210 |
|
Buildings
and equipment under construction
|
|
|
297 |
|
|
|
352 |
|
|
|
|
7,830 |
|
|
|
7,473 |
|
Less
accumulated depreciation
|
|
|
4,254 |
|
|
|
3,954 |
|
Net
property, plant and equipment
|
|
$ |
3,576 |
|
|
$ |
3,519 |
|
Approximately
$278 million will be required to complete buildings and equipment under
construction at October 3, 2009.
NOTE
8: GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
by segment, net of $286 million of accumulated amortization at October 3, 2009,
and September 27, 2008:
|
|
|
|
|
in
millions
|
|
|
|
2009
|
|
|
2008
|
|
Chicken
|
|
$ |
973 |
|
|
$ |
945 |
|
Beef
|
|
|
563 |
|
|
|
1,185 |
|
Pork
|
|
|
317 |
|
|
|
317 |
|
Prepared
Foods
|
|
|
64 |
|
|
|
64 |
|
Total
Goodwill
|
|
$ |
1,917 |
|
|
$ |
2,511 |
|
Other
intangible assets by type at October 3, 2009, and September 27,
2008:
|
|
|
|
|
in
millions
|
|
|
|
2009
|
|
|
2008
|
|
Gross
Carrying Value:
|
|
|
|
|
|
|
Trademarks
|
|
$ |
57 |
|
|
$ |
62 |
|
Patents
and intellectual property
|
|
|
145 |
|
|
|
94 |
|
Land
use rights
|
|
|
23 |
|
|
|
- |
|
Less
Accumulated Amortization
|
|
|
38 |
|
|
|
28 |
|
Total
Intangible Assets
|
|
$ |
187 |
|
|
$ |
128 |
|
Amortization
expense of $10 million, $3 million and $3 million was recognized during fiscal
2009, 2008 and 2007, respectively. We estimate amortization expense on
intangible assets for the next five fiscal years subsequent to October 3, 2009
will be: 2010 - $14 million; 2011 - $14 million; 2012 - $13 million; 2013 - $13
million; 2014 - $12 million. Beginning with the date benefits are realized,
patents and intellectual property and land use rights are amortized using the
straight-line method over their estimated period of benefit of 5-30 years and
10-30 years, respectively.
NOTE
9: OTHER CURRENT LIABILITIES
Other
current liabilities at October 3, 2009, and September 27, 2008,
include:
|
|
|
|
|
in
millions
|
|
|
|
2009
|
|
|
2008
|
|
Accrued
salaries, wages and benefits
|
|
$ |
187 |
|
|
$ |
259 |
|
Self-insurance
reserves
|
|
|
230 |
|
|
|
236 |
|
Other
|
|
|
344 |
|
|
|
383 |
|
Total
other current liabilities
|
|
$ |
761 |
|
|
$ |
878 |
|
NOTE
10: COMMITMENTS
We lease
equipment, properties and certain farms for which total rentals approximated
$175 million, $163 million and $133 million, respectively, in fiscal 2009, 2008
and 2007. Most leases have terms up to six years with varying 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 non-cancelable leases at October 3, 2009,
were:
|
|
in
millions
|
|
2010
|
|
$ |
79 |
|
2011
|
|
|
67 |
|
2012
|
|
|
53 |
|
2013
|
|
|
34 |
|
2014
|
|
|
21 |
|
2015
and beyond
|
|
|
22 |
|
Total
|
|
$ |
276 |
|
We
guarantee debt of outside third parties, which consist of a lease and grower
loans, all of which are substantially collateralized by the underlying assets.
Terms of the underlying debt cover periods up to nine years, and the maximum
potential amount of future payments as of October 3, 2009, was $59 million. We
also maintain operating leases for various types of equipment, some of which
contain residual value guarantees for the market value of the underlying leased
assets at the end of the term of the lease. The terms of the lease maturities
cover periods up to six years. The maximum potential amount of the residual
value guarantees is $55 million, of which $23 million would be recoverable
through various recourse provisions and an additional undeterminable recoverable
amount based on the fair market value of the underlying leased assets. The
likelihood of material payments under these guarantees is not considered
probable. At October 3, 2009, and September 27, 2008, no material liabilities
for guarantees were recorded.
We have
cash flow assistance programs in which certain livestock suppliers participate.
Under these programs, we pay an amount for livestock equivalent to a standard
cost to grow such livestock during periods of low market sales prices. The
amounts of such payments that are in excess of the market sales price are
recorded as receivables and accrue interest. Participating suppliers are
obligated to repay these receivables balances when market sales prices exceed
this standard cost, or upon termination of the agreement. Our maximum
obligation associated with these programs is limited to the fair value of each
participating livestock supplier’s net tangible assets. The potential
maximum obligation as of October 3, 2009, is approximately $250 million. The
total receivables under these programs were $72 million and $7 million at
October 3, 2009, and September 27, 2008, respectively, and are included, net of
allowance for uncollectible amounts, in Other Assets in our Consolidated Balance
Sheets. Even though these programs are limited to the net tangible assets of the
participating livestock suppliers, we also manage a portion of our credit risk
associated with these programs by obtaining security interests in livestock
suppliers' assets. After analyzing residual credit risks and general market
conditions, we have recorded an allowance for these programs' estimated
uncollectible receivables of $20 million and $2 million at October 3, 2009 and
September 27, 2008, respectively.
The
minority partner in our Shandong Tyson Xinchang Foods joint ventures in China
has the right to exercise put options to require us to purchase their entire 40%
equity interest at a price equal to the minority partner’s contributed capital
plus (minus) its pro-rata share of the joint venture's accumulated and
undistributed net earnings (losses). The put options are exercisable for a
five-year term commencing the later of (i) April 2011 or (ii) the date upon
which a shareholder of the minority partner is no longer general manager of the
joint venture operations. At October 3, 2009, the put options, if they had been
exercisable, would have resulted in a purchase price of approximately $74
million for the minority partner’s entire equity interest. We do not believe the
exercise of the put options would materially impact our results of operations or
financial condition.
Additionally,
we enter into future purchase commitments for various items, such as grains,
livestock contracts and fixed grower fees. At October 3, 2009, these commitments
totaled:
|
|
in
millions
|
|
2010
|
|
$ |
423 |
|
2011
|
|
|
36 |
|
2012
|
|
|
19 |
|
2013
|
|
|
11 |
|
2014
|
|
|
8 |
|
2015
and beyond
|
|
|
22 |
|
Total
|
|
$ |
519 |
|
NOTE
11: LONG-TERM DEBT
The major
components of long-term debt are as follows (in millions):
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Revolving
credit facility – expires March 2012
|
|
$ |
- |
|
|
$ |
- |
|
Senior
notes:
|
|
|
|
|
|
|
|
|
7.95%
Notes due February 2010 (2010 Notes)
|
|
|
140 |
|
|
|
234 |
|
8.25%
Notes due October 2011 (2011 Notes)
|
|
|
839 |
|
|
|
998 |
|
3.25%
Convertible senior notes due October 2013 (2013 Notes)
|
|
|
458 |
|
|
|
458 |
|
10.50%
Senior notes due March 2014 (2014 Notes)
|
|
|
756 |
|
|
|
- |
|
7.85%
Senior notes due April 2016 (2016 Notes)
|
|
|
922 |
|
|
|
960 |
|
7.00%
Notes due May 2018
|
|
|
172 |
|
|
|
172 |
|
7.125%
Senior notes due February 2026
|
|
|
9 |
|
|
|
9 |
|
7.00%
Notes due January 2028
|
|
|
27 |
|
|
|
27 |
|
GO
Zone tax-exempt bonds due October 2033 (0.10% at 10/03/09)
|
|
|
100 |
|
|
|
- |
|
Other
|
|
|
129 |
|
|
|
38 |
|
Total
debt
|
|
|
3,552 |
|
|
|
2,896 |
|
Less
current debt
|
|
|
219 |
|
|
|
8 |
|
Total
long-term debt
|
|
$ |
3,333 |
|
|
$ |
2,888 |
|
Annual
maturities of long-term debt for the five fiscal years subsequent to October 3,
2009, are: 2010-$219 million; 2011-$855 million; 2012-$11 million; 2013-$6
million; 2014-$1.2 billion.
Revolving Credit
Facility
We
entered into a new revolving credit facility in March 2009 totaling $1.0 billion
that supports short-term funding needs and letters of credit, which replaced our
revolving credit facility scheduled to expire in September 2010. Loans made
under this facility will mature and the commitments thereunder will terminate in
March 2012. However, if our 2011 Notes are not refinanced, purchased or defeased
prior to July 3, 2011, the outstanding loans under this facility will mature on
and commitments thereunder will terminate on July 3, 2011. We incurred
approximately $30 million in transaction fees which will be amortized over the
three-year life of this facility.
Availability
under this facility, up to $1.0 billion, is based on a percentage of certain
eligible receivables and eligible inventory and is reduced by certain reserves.
After reducing the amount available by outstanding letters of credit issued
under this facility, the amount available for borrowing under this facility at
October 3, 2009, was $733 million. At October 3, 2009, we had outstanding
letters of credit issued under this facility totaling approximately $267 million
and an additional $51 million of bilateral letters of credit not issued under
this facility, none of which were drawn upon. Our letters of credit are issued
primarily in support of workers’ compensation insurance programs, derivative
activities and Dynamic Fuels’ GO Zone tax-exempt bonds.
This
facility is fully and unconditionally guaranteed on a senior secured basis by
substantially all of our domestic subsidiaries. The guarantors’ cash, accounts
receivable, inventory and proceeds received related to these items secure our
obligations under this facility.
2013
Notes
In
September 2008, we issued $458 million principal amount 3.25% convertible senior
unsecured notes due October 15, 2013, with interest payable semi-annually in
arrears on April 15 and October 15. The conversion rate initially is 59.1935
shares of Class A stock per $1,000 principal amount of notes, which is
equivalent to an initial conversion price of $16.89 per share of Class A stock.
The 2013 Notes may be converted before the close of business on July 12, 2013,
only under the following circumstances:
●
|
during
any fiscal quarter after December 27, 2008, if the last reported sale
price of our Class A stock for at least 20 trading days during a
period of 30 consecutive trading days ending on the last trading day of
the preceding fiscal quarter is at least 130% of the applicable conversion
price on each applicable trading day (which would currently require our
shares to trade at or above $21.96); or
|
●
|
during
the five business days after any 10 consecutive trading days (measurement
period) in which the trading price per $1,000 principal amount of notes
for each trading day of the measurement period was less than 98% of the
product of the last reported sale price of our Class A stock and the
applicable conversion rate on each such day; or
|
●
|
upon
the occurrence of specified corporate events as defined in the
supplemental indenture.
|
On and
after July 15, 2013, until the close of business on the second scheduled
trading day immediately preceding the maturity date, holders may convert their
notes at any time, regardless of the foregoing circumstances. Upon conversion,
we will deliver cash up to the aggregate principal amount of the 2013 Notes to
be converted and shares of our Class A stock in respect of the remainder,
if any, of our conversion obligation in excess of the aggregate principal amount
of the 2013 Notes being converted. As of October 3, 2009, none of the conditions
permitting conversion of the 2013 Notes had been satisfied.
The 2013
Notes were accounted for as a combined instrument. Accordingly, we accounted for
the entire agreement as one debt instrument because the conversion feature does
not meet the requirements to be accounted for separately as a derivative
financial instrument.
In
connection with the issuance of the 2013 Notes, we entered into separate
convertible note hedge transactions with respect to our common stock to minimize
the potential economic dilution upon conversion of the 2013 Notes. We also
entered into separate warrant transactions. We recorded the purchase of the note
hedge transactions as a reduction to capital in excess of par value, net of $36
million pertaining to the related deferred tax asset, and we recorded the
proceeds of the warrant transactions as an increase to capital in excess of par
value. Subsequent changes in fair value of these instruments are not recognized
in the financial statements as long as the instruments continue to meet the
criteria for equity classification.
We
purchased call options in private transactions for $94 million that permit us to
acquire up to approximately 27 million shares of our Class A stock at an initial
strike price of $16.89 per share, subject to adjustment. The call options allow
us to acquire a number of shares of our Class A stock initially equal to the
number of shares of Class A stock issuable to the holders of the 2013 Notes upon
conversion. These call options will terminate upon the maturity of the 2013
Notes.
We sold
warrants in private transactions for total proceeds of $44 million. The
warrants permit the purchasers to acquire up to approximately 27 million
shares of our Class A stock at an initial exercise price of $22.31 per share,
subject to adjustment. The warrants are exercisable on various dates from
January 2014 through March 2014.
The
maximum amount of shares that may be issued to satisfy the conversion of the
2013 Notes is limited to 35.9 million shares. However, the
convertible note hedge and warrant transactions, in effect, increase the initial
conversion price of the 2013 Notes from $16.89 per share to $22.31 per
share, thus reducing the potential future economic dilution associated with
conversion of the 2013 Notes. If our share price is below $22.31 upon
conversion of the 2013 Notes, there is no economic net share
impact. Upon conversion, a 10% increase in our share price above the
$22.31 conversion price would result in the issuance of 2.5 million incremental
shares. The 2013 Notes and the warrants could have a dilutive effect
on our earnings per share to the extent the price of our Class A stock during a
given measurement period exceeds the respective exercise prices of those
instruments. The call options are excluded from the calculation of diluted
earnings per share as their impact is anti-dilutive.
2014
Notes
In March
2009, we issued $810 million of senior unsecured notes, which will mature in
March 2014. The 2014 Notes carry a 10.50% interest rate, with interest payments
due semi-annually on March 1 and September 1. After the original issue discount
of $59 million, based on an issue price of 92.756% of face value, we received
net proceeds of $751 million. In addition, we incurred offering expenses of $18
million. We used the net proceeds towards the repayment of our borrowings under
our former accounts receivable securitization facility and for other general
corporate purposes. We also placed $234 million of the net proceeds in a blocked
cash collateral account which is used for the payment, prepayment, repurchase or
defeasance of the 2010 Notes. At October 3, 2009, we had $140 million remaining
in the blocked cash collateral account. The remaining proceeds are recorded in
Current Assets as Restricted Cash in the Consolidated Condensed Balance Sheets.
The 2014 Notes are fully and unconditionally guaranteed by substantially all of
our domestic subsidiaries.
2016
Notes
The 2016
Notes carried an interest rate at issuance of 6.60%, with an interest step up
feature dependent on their credit rating. On November 13, 2008, Moody’s Investor
Services, Inc. downgraded the credit rating from “Ba1” to “Ba3.” This downgrade
increased the interest rate from 7.35% to 7.85%, effective beginning with the
six-month interest payment due April 1, 2009.
GO Zone Tax-Exempt
Bonds
In
October 2008, Dynamic Fuels received $100 million in proceeds from the sale of
Gulf Opportunity Zone tax-exempt bonds made available by the federal government
to the regions affected by Hurricanes Katrina and Rita in 2005. These floating
rate bonds are due October 1, 2033. In November 2008, we entered into an
interest rate swap related to these bonds to mitigate our interest rate risk on
a portion of the bonds for five years. We also issued a letter of credit as a
guarantee for the entire bond issuance. The proceeds from the bond issuance can
only be used towards the construction of the Dynamic Fuels’ facility.
Accordingly, the unused proceeds are recorded as non-current Restricted Cash in
the Consolidated Balance Sheets. We expect the majority of the unused proceeds
will be used by our second quarter of fiscal 2010.
Debt
Covenants
Our
revolving credit facility contains affirmative and negative covenants that,
among other things, may limit or restrict our ability to: create liens and
encumbrances; incur debt; merge, dissolve, liquidate or consolidate; make
acquisitions and investments; dispose of or transfer assets; pay dividends or
make other payments in respect to our capital stock; amend material documents;
change the nature of our business; make certain payments of debt; engage in
certain transactions with affiliates; and enter into sale/leaseback or hedging
transactions, in each case, subject to certain qualifications and exceptions. If
availability under this facility is less than the greater of 15% of the
commitments and $150 million, we will be required to maintain a minimum fixed
charge coverage ratio.
Our 2014
Notes also contain affirmative and negative covenants that, among other things,
may limit or restrict our ability to: incur additional debt and issue preferred
stock; make certain investments and restricted payments; create liens; create
restrictions on distributions from restricted subsidiaries; engage in specified
sales of assets and subsidiary stock; enter into transactions with affiliates;
enter new lines of business; engage in consolidation, mergers and acquisitions;
and engage in certain sale/leaseback transactions.
Condensed Consolidating
Financial Statements
Tyson
Fresh Meats, Inc. (TFM), our wholly-owned subsidiary, has fully and
unconditionally guaranteed the 2016 Notes. TFM and substantially all of our
wholly-owned domestic subsidiaries have fully and unconditionally guaranteed the
2014 Notes. The following financial information presents condensed consolidating
financial statements, which include Tyson Foods, Inc. (TFI Parent); Tyson Fresh
Meats, Inc. (TFM Parent); the other 2014 Notes' guarantor subsidiaries
(Guarantors) on a combined basis; the elimination entries necessary to reflect
TFM Parent and the Guarantors, which collectively represent the 2014 Notes'
total guarantor subsidiaries (2014 Guarantors), on a combined basis; the 2014
Notes' non-guarantor subsidiaries (Non-Guarantors) on a combined basis; the
elimination entries necessary to consolidate TFI Parent, the 2014 Guarantors and
the Non-Guarantors; and Tyson Foods, Inc. on a consolidated basis, and is
provided as an alternative to providing separate financial statements for the
guarantor(s). Certain prior period amounts have been recast to conform with
current year presentation and to reflect the legal subsidiary ownership
structure as of October 3, 2009.
Condensed
Consolidating Statement of Income for the year ended October 3,
2009
|
|
|
|
|
|
in
millions
|
|
|
|
|
|
|
2014
Guarantors
|
|
|
|
|
|
|
|
|
|
|
|
|
TFI
Parent
|
|
|
TFM
Parent
|
|
|
Guar-antors
|
|
|
Elimin-ations
|
|
|
Subtotal
|
|
|
Non-Guar-antors
|
|
|
Elimin-ations
|
|
|
Total
|
|
Net
Sales
|
|
$ |
11 |
|
|
$ |
14,504 |
|
|
$ |
12,245 |
|
|
$ |
(725 |
) |
|
$ |
26,024 |
|
|
$ |
709 |
|
|
$ |
(40 |
) |
|
$ |
26,704 |
|
Cost
of Sales
|
|
|
132 |
|
|
|
13,970 |
|
|
|
11,526 |
|
|
|
(725 |
) |
|
|
24,771 |
|
|
|
638 |
|
|
|
(40 |
) |
|
|
25,501 |
|
|
|
|
(121 |
) |
|
|
534 |
|
|
|
719 |
|
|
|
- |
|
|
|
1,253 |
|
|
|
71 |
|
|
|
- |
|
|
|
1,203 |
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
132 |
|
|
|
187 |
|
|
|
450 |
|
|
|
- |
|
|
|
637 |
|
|
|
72 |
|
|
|
- |
|
|
|
841 |
|
Goodwill
impairment
|
|
|
- |
|
|
|
560 |
|
|
|
- |
|
|
|
- |
|
|
|
560 |
|
|
|
- |
|
|
|
- |
|
|
|
560 |
|
Other
charges
|
|
|
- |
|
|
|
- |
|
|
|
17 |
|
|
|
- |
|
|
|
17 |
|
|
|
- |
|
|
|
- |
|
|
|
17 |
|
Operating
Income (Loss)
|
|
|
(253 |
) |
|
|
(213 |
) |
|
|
252 |
|
|
|
- |
|
|
|
39 |
|
|
|
(1 |
) |
|
|
- |
|
|
|
(215 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
(Income) Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net
|
|
|
268 |
|
|
|
13 |
|
|
|
20 |
|
|
|
- |
|
|
|
33 |
|
|
|
(8 |
) |
|
|
- |
|
|
|
293 |
|
Other,
net
|
|
|
11 |
|
|
|
(3 |
) |
|
|
(6 |
) |
|
|
- |
|
|
|
(9 |
) |
|
|
16 |
|
|
|
- |
|
|
|
18 |
|
Equity
in net earnings of subsidiaries
|
|
|
157 |
|
|
|
(32 |
) |
|
|
44 |
|
|
|
13 |
|
|
|
25 |
|
|
|
(17 |
) |
|
|
(165 |
) |
|
|
- |
|
|
|
|
436 |
|
|
|
(22 |
) |
|
|
58 |
|
|
|
13 |
|
|
|
49 |
|
|
|
(9 |
) |
|
|
(165 |
) |
|
|
311 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(Loss) from Continuing Operations before Income Taxes and Minority
Interest
|
|
|
(689 |
) |
|
|
(191 |
) |
|
|
194 |
|
|
|
(13 |
) |
|
|
(10 |
) |
|
|
8 |
|
|
|
165 |
|
|
|
(526 |
) |
Income
Tax Expense (Benefit)
|
|
|
(131 |
) |
|
|
111 |
|
|
|
34 |
|
|
|
- |
|
|
|
145 |
|
|
|
- |
|
|
|
- |
|
|
|
14 |
|
Income
(Loss) from Continuing Operations before Minority Interest
|
|
|
(558 |
) |
|
|
(302 |
) |
|
|
160 |
|
|
|
(13 |
) |
|
|
(155 |
) |
|
|
8 |
|
|
|
165 |
|
|
|
(540 |
) |
Minority
Interest
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(4 |
) |
|
|
- |
|
|
|
(4 |
) |
Income
(Loss) from Continuing Operations
|
|
|
(558 |
) |
|
|
(302 |
) |
|
|
160 |
|
|
|
(13 |
) |
|
|
(155 |
) |
|
|
12 |
|
|
|
165 |
|
|
|
(536 |
) |
Income
(Loss) from Discontinued
Operation
|
|
|
21 |
|
|
|
5 |
|
|
|
- |
|
|
|
- |
|
|
|
5 |
|
|
|
(27 |
) |
|
|
- |
|
|
|
(1 |
) |
Net
Income (Loss)
|
|
$ |
(537 |
) |
|
$ |
(297 |
) |
|
$ |
160 |
|
|
$ |
(13 |
) |
|
$ |
(150 |
) |
|
$ |
(15 |
) |
|
$ |
165 |
|
|
$ |
(537 |
) |
Condensed
Consolidating Statement of Income for the year ended September 27,
2008
|
|
|
|
|
|
in
millions
|
|
|
|
|
|
|
2014
Guarantors
|
|
|
|
|
|
|
|
|
|
|
|
|
TFI
Parent
|
|
|
TFM
Parent
|
|
|
Guar-antors
|
|
|
Elimin-ations
|
|
|
Subtotal
|
|
|
Non-Guar-antors
|
|
|
Elimin-ations
|
|
|
Total
|
|
Net
Sales
|
|
$ |
19 |
|
|
$ |
15,638 |
|
|
$ |
11,463 |
|
|
$ |
(811 |
) |
|
$ |
26,290 |
|
|
$ |
580 |
|
|
$ |
(27 |
) |
|
$ |
26,862 |
|
Cost
of Sales
|
|
|
74 |
|
|
|
15,105 |
|
|
|
10,796 |
|
|
|
(811 |
) |
|
|
25,090 |
|
|
|
479 |
|
|
|
(27 |
) |
|
|
25,616 |
|
|
|
|
(55 |
) |
|
|
533 |
|
|
|
667 |
|
|
|
- |
|
|
|
1,200 |
|
|
|
101 |
|
|
|
- |
|
|
|
1,246 |
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
83 |
|
|
|
208 |
|
|
|
533 |
|
|
|
- |
|
|
|
741 |
|
|
|
55 |
|
|
|
- |
|
|
|
879 |
|
Other
charges
|
|
|
1 |
|
|
|
18 |
|
|
|
17 |
|
|
|
- |
|
|
|
35 |
|
|
|
- |
|
|
|
- |
|
|
|
36 |
|
Operating
Income (Loss)
|
|
|
(139 |
) |
|
|
307 |
|
|
|
117 |
|
|
|
- |
|
|
|
424 |
|
|
|
46 |
|
|
|
- |
|
|
|
331 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
(Income) Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net
|
|
|
181 |
|
|
|
17 |
|
|
|
16 |
|
|
|
- |
|
|
|
33 |
|
|
|
(8 |
) |
|
|
- |
|
|
|
206 |
|
Other,
net
|
|
|
(13 |
) |
|
|
(5 |
) |
|
|
(11 |
) |
|
|
- |
|
|
|
(16 |
) |
|
|
- |
|
|
|
- |
|
|
|
(29 |
) |
Equity
in net earnings of subsidiaries
|
|
|
(285 |
) |
|
|
(27 |
) |
|
|
5 |
|
|
|
18 |
|
|
|
(4 |
) |
|
|
(9 |
) |
|
|
298 |
|
|
|
- |
|
|
|
|
(117 |
) |
|
|
(15 |
) |
|
|
10 |
|
|
|
18 |
|
|
|
13 |
|
|
|
(17 |
) |
|
|
298 |
|
|
|
177 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(Loss) from Continuing Operations before Income Taxes
|
|
|
(22 |
) |
|
|
322 |
|
|
|
107 |
|
|
|
(18 |
) |
|
|
411 |
|
|
|
63 |
|
|
|
(298 |
) |
|
|
154 |
|
Income
Tax Expense (Benefit)
|
|
|
(108 |
) |
|
|
116 |
|
|
|
37 |
|
|
|
- |
|
|
|
153 |
|
|
|
23 |
|
|
|
- |
|
|
|
68 |
|
Income
from Continuing Operations
|
|
|
86 |
|
|
|
206 |
|
|
|
70 |
|
|
|
(18 |
) |
|
|
258 |
|
|
|
40 |
|
|
|
(298 |
) |
|
|
86 |
|
Income
from Discontinued Operation
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net
Income
|
|
$ |
86 |
|
|
$ |
206 |
|
|
$ |
70 |
|
|
$ |
(18 |
) |
|
$ |
258 |
|
|
$ |
40 |
|
|
$ |
(298 |
) |
|
$ |
86 |
|
Condensed
Consolidating Statement of Income for the year ended September 29,
2007
|
|
|
|
|
|
in
millions
|
|
|
|
|
|
|
2014
Guarantors
|
|
|
|
|
|
|
|
|
|
|
|
|
TFI
Parent
|
|
|
TFM
Parent
|
|
|
Guar-antors
|
|
|
Elimin-ations
|
|
|
Subtotal
|
|
|
Non-Guar-antors
|
|
|
Elimin-ations
|
|
|
Total
|
|
Net
Sales
|
|
$ |
154 |
|
|
$ |
15,189 |
|
|
$ |
10,793 |
|
|
$ |
(736 |
) |
|
$ |
25,246 |
|
|
$ |
482 |
|
|
$ |
(153 |
) |
|
$ |
25,729 |
|
Cost
of Sales
|
|
|
(90 |
) |
|
|
14,849 |
|
|
|
10,040 |
|
|
|
(736 |
) |
|
|
24,153 |
|
|
|
390 |
|
|
|
(153 |
) |
|
|
24,300 |
|
|
|
|
244 |
|
|
|
340 |
|
|
|
753 |
|
|
|
- |
|
|
|
1,093 |
|
|
|
92 |
|
|
|
- |
|
|
|
1,429 |
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
104 |
|
|
|
176 |
|
|
|
483 |
|
|
|
- |
|
|
|
659 |
|
|
|
51 |
|
|
|
- |
|
|
|
814 |
|
Other
charges
|
|
|
1 |
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
2 |
|
Operating
Income
|
|
|
139 |
|
|
|
163 |
|
|
|
270 |
|
|
|
- |
|
|
|
433 |
|
|
|
41 |
|
|
|
- |
|
|
|
613 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
(Income) Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net
|
|
|
186 |
|
|
|
29 |
|
|
|
18 |
|
|
|
- |
|
|
|
47 |
|
|
|
(9 |
) |
|
|
- |
|
|
|
224 |
|
Other,
net
|
|
|
(1 |
) |
|
|
(24 |
) |
|
|
(8 |
) |
|
|
- |
|
|
|
(32 |
) |
|
|
12 |
|
|
|
- |
|
|
|
(21 |
) |
Equity
in net earnings of subsidiaries
|
|
|
(285 |
) |
|
|
(94 |
) |
|
|
(9 |
) |
|
|
77 |
|
|
|
(26 |
) |
|
|
(18 |
) |
|
|
329 |
|
|
|
- |
|
|
|
|
(100 |
) |
|
|
(89 |
) |
|
|
1 |
|
|
|
77 |
|
|
|
(11 |
) |
|
|
(15 |
) |
|
|
329 |
|
|
|
203 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from Continuing Operations before Income Taxes
|
|
|
239 |
|
|
|
252 |
|
|
|
269 |
|
|
|
(77 |
) |
|
|
444 |
|
|
|
56 |
|
|
|
(329 |
) |
|
|
410 |
|
Income
Tax Expense (Benefit)
|
|
|
(29 |
) |
|
|
53 |
|
|
|
110 |
|
|
|
- |
|
|
|
163 |
|
|
|
8 |
|
|
|
- |
|
|
|
142 |
|
Income
from Continuing Operations
|
|
|
268 |
|
|
|
199 |
|
|
|
159 |
|
|
|
(77 |
) |
|
|
281 |
|
|
|
48 |
|
|
|
(329 |
) |
|
|
268 |
|
Income
from Discontinued Operation
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net
Income
|
|
$ |
268 |
|
|
$ |
199 |
|
|
$ |
159 |
|
|
$ |
(77 |
) |
|
$ |
281 |
|
|
$ |
48 |
|
|
$ |
(329 |
) |
|
$ |
268 |
|
Condensed
Consolidating Balance Sheet as of October 3, 2009
|
|
|
|
|
|
in
millions
|
|
|
|
|
|
|
2014
Guarantors
|
|
|
|
|
|
|
|
|
|
|
|
|
TFI
Parent
|
|
|
TFM
Parent
|
|
|
Guar-antors
|
|
|
Elimin-ations
|
|
|
Subtotal
|
|
|
Non-Guar-antors
|
|
|
Elimin-ations
|
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
788 |
|
|
$ |
- |
|
|
$ |
788 |
|
|
$ |
216 |
|
|
$ |
- |
|
|
$ |
1,004 |
|
Restricted
cash
|
|
|
- |
|
|
|
- |
|
|
|
140 |
|
|
|
- |
|
|
|
140 |
|
|
|
- |
|
|
|
- |
|
|
|
140 |
|
Accounts
receivable, net
|
|
|
2 |
|
|
|
418 |
|
|
|
3,309 |
|
|
|
(7 |
) |
|
|
3,720 |
|
|
|
116 |
|
|
|
(2,738 |
) |
|
|
1,100 |
|
Inventories,
net
|
|
|
1 |
|
|
|
586 |
|
|
|
1,239 |
|
|
|
- |
|
|
|
1,825 |
|
|
|
183 |
|
|
|
- |
|
|
|
2,009 |
|
Other
current assets
|
|
|
198 |
|
|
|
89 |
|
|
|
29 |
|
|
|
(17 |
) |
|
|
101 |
|
|
|
36 |
|
|
|
(213 |
) |
|
|
122 |
|
Total
Current Assets
|
|
|
201 |
|
|
|
1,093 |
|
|
|
5,505 |
|
|
|
(24 |
) |
|
|
6,574 |
|
|
|
551 |
|
|
|
(2,951 |
) |
|
|
4,375 |
|
Restricted
cash
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
43 |
|
|
|
- |
|
|
|
43 |
|
Net
Property, Plant and Equipment
|
|
|
40 |
|
|
|
883 |
|
|
|
2,256 |
|
|
|
- |
|
|
|
3,139 |
|
|
|
397 |
|
|
|
- |
|
|
|
3,576 |
|
Goodwill
|
|
|
- |
|
|
|
881 |
|
|
|
977 |
|
|
|
- |
|
|
|
1,858 |
|
|
|
59 |
|
|
|
- |
|
|
|
1,917 |
|
Intangible
Assets
|
|
|
- |
|
|
|
42 |
|
|
|
59 |
|
|
|
- |
|
|
|
101 |
|
|
|
86 |
|
|
|
- |
|
|
|
187 |
|
Other
Assets
|
|
|
211 |
|
|
|
120 |
|
|
|
37 |
|
|
|
- |
|
|
|
157 |
|
|
|
346 |
|
|
|
(217 |
) |
|
|
497 |
|
Investment
in Subsidiaries
|
|
|
10,038 |
|
|
|
1,763 |
|
|
|
674 |
|
|
|
(1,597 |
) |
|
|
840 |
|
|
|
296 |
|
|
|
(11,174 |
) |
|
|
- |
|
Total
Assets
|
|
$ |
10,490 |
|
|
$ |
4,782 |
|
|
$ |
9,508 |
|
|
$ |
(1,621 |
) |
|
$ |
12,669 |
|
|
$ |
1,778 |
|
|
$ |
(14,342 |
) |
|
$ |
10,595 |
|
Liabilities
and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
debt
|
|
$ |
3 |
|
|
$ |
140 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
140 |
|
|
$ |
76 |
|
|
$ |
- |
|
|
$ |
219 |
|
Trade
accounts payable
|
|
|
15 |
|
|
|
375 |
|
|
|
550 |
|
|
|
- |
|
|
|
925 |
|
|
|
73 |
|
|
|
- |
|
|
|
1,013 |
|
Other
current liabilities
|
|
|
2,790 |
|
|
|
251 |
|
|
|
296 |
|
|
|
(24 |
) |
|
|
523 |
|
|
|
399 |
|
|
|
(2,951 |
) |
|
|
761 |
|
Total
Current Liabilities
|
|
|
2,808 |
|
|
|
766 |
|
|
|
846 |
|
|
|
(24 |
) |
|
|
1,588 |
|
|
|
548 |
|
|
|
(2,951 |
) |
|
|
1,993 |
|
Long-Term
Debt
|
|
|
3,187 |
|
|
|
15 |
|
|
|
180 |
|
|
|
- |
|
|
|
195 |
|
|
|
131 |
|
|
|
(180 |
) |
|
|
3,333 |
|
Deferred
Income Taxes
|
|
|
- |
|
|
|
108 |
|
|
|
182 |
|
|
|
- |
|
|
|
290 |
|
|
|
27 |
|
|
|
(37 |
) |
|
|
280 |
|
Other
Liabilities
|
|
|
143 |
|
|
|
161 |
|
|
|
202 |
|
|
|
- |
|
|
|
363 |
|
|
|
33 |
|
|
|
- |
|
|
|
539 |
|
Minority
Interest
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
98 |
|
|
|
- |
|
|
|
98 |
|
Shareholders’
Equity
|
|
|
4,352 |
|
|
|
3,732 |
|
|
|
8,098 |
|
|
|
(1,597 |
) |
|
|
10,233 |
|
|
|
941 |
|
|
|
(11,174 |
) |
|
|
4,352 |
|
Total
Liabilities and Shareholders’ Equity
|
|
$ |
10,490 |
|
|
$ |
4,782 |
|
|
$ |
9,508 |
|
|
$ |
(1,621 |
) |
|
$ |
12,669 |
|
|
$ |
1,778 |
|
|
$ |
(14,342 |
) |
|
$ |
10,595 |
|
Condensed
Consolidating Balance Sheet as of September 27, 2008
|
|
|
|
|
|
in
millions
|
|
|
|
|
|
|
2014
Guarantors
|
|
|
|
|
|
|
|
|
|
|
|
|
TFI
Parent
|
|
|
TFM
Parent
|
|
|
Guar-antors
|
|
|
Elimin-ations
|
|
|
Subtotal
|
|
|
Non-Guar-antors
|
|
|
Elimin-ations
|
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
140 |
|
|
$ |
- |
|
|
$ |
35 |
|
|
$ |
- |
|
|
$ |
35 |
|
|
$ |
75 |
|
|
$ |
- |
|
|
$ |
250 |
|
Accounts
receivable, net
|
|
|
1 |
|
|
|
122 |
|
|
|
3,614 |
|
|
|
- |
|
|
|
3,736 |
|
|
|
113 |
|
|
|
(2,579 |
) |
|
|
1,271 |
|
Inventories,
net
|
|
|
1 |
|
|
|
724 |
|
|
|
1,640 |
|
|
|
- |
|
|
|
2,364 |
|
|
|
173 |
|
|
|
- |
|
|
|
2,538 |
|
Other
current assets
|
|
|
123 |
|
|
|
55 |
|
|
|
24 |
|
|
|
(12 |
) |
|
|
67 |
|
|
|
72 |
|
|
|
(119 |
) |
|
|
143 |
|
Assets
of discontinued operation held for sale
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
159 |
|
|
|
- |
|
|
|
159 |
|
Total
Current Assets
|
|
|
265 |
|
|
|
901 |
|
|
|
5,313 |
|
|
|
(12 |
) |
|
|
6,202 |
|
|
|
592 |
|
|
|
(2,698 |
) |
|
|
4,361 |
|
Net
Property, Plant and Equipment
|
|
|
43 |
|
|
|
960 |
|
|
|
2,371 |
|
|
|
- |
|
|
|
3,331 |
|
|
|
145 |
|
|
|
- |
|
|
|
3,519 |
|
Goodwill
|
|
|
- |
|
|
|
1,502 |
|
|
|
965 |
|
|
|
- |
|
|
|
2,467 |
|
|
|
44 |
|
|
|
- |
|
|
|
2,511 |
|
Intangible
Assets
|
|
|
- |
|
|
|
47 |
|
|
|
64 |
|
|
|
- |
|
|
|
111 |
|
|
|
17 |
|
|
|
- |
|
|
|
128 |
|
Other
Assets
|
|
|
132 |
|
|
|
91 |
|
|
|
55 |
|
|
|
- |
|
|
|
146 |
|
|
|
284 |
|
|
|
(231 |
) |
|
|
331 |
|
Investment
in Subsidiaries
|
|
|
10,293 |
|
|
|
1,789 |
|
|
|
654 |
|
|
|
(1,639 |
) |
|
|
804 |
|
|
|
282 |
|
|
|
(11,379 |
) |
|
|
- |
|
Total
Assets
|
|
$ |
10,733 |
|
|
$ |
5,290 |
|
|
$ |
9,422 |
|
|
$ |
(1,651 |
) |
|
$ |
13,061 |
|
|
$ |
1,364 |
|
|
$ |
(14,308 |
) |
|
$ |
10,850 |
|
Liabilities
and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
debt
|
|
$ |
8 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
8 |
|
Trade
accounts payable
|
|
|
108 |
|
|
|
486 |
|
|
|
559 |
|
|
|
- |
|
|
|
1,045 |
|
|
|
64 |
|
|
|
- |
|
|
|
1,217 |
|
Other
current liabilities
|
|
|
2,804 |
|
|
|
201 |
|
|
|
282 |
|
|
|
(12 |
) |
|
|
471 |
|
|
|
301 |
|
|
|
(2,698 |
) |
|
|
878 |
|
Total
Current Liabilities
|
|
|
2,920 |
|
|
|
687 |
|
|
|
841 |
|
|
|
(12 |
) |
|
|
1,516 |
|
|
|
365 |
|
|
|
(2,698 |
) |
|
|
2,103 |
|
Long-Term
Debt
|
|
|
2,632 |
|
|
|
249 |
|
|
|
180 |
|
|
|
- |
|
|
|
429 |
|
|
|
7 |
|
|
|
(180 |
) |
|
|
2,888 |
|
Deferred
Income Taxes
|
|
|
- |
|
|
|
129 |
|
|
|
190 |
|
|
|
- |
|
|
|
319 |
|
|
|
23 |
|
|
|
(51 |
) |
|
|
291 |
|
Other
Liabilities
|
|
|
167 |
|
|
|
137 |
|
|
|
190 |
|
|
|
- |
|
|
|
327 |
|
|
|
31 |
|
|
|
- |
|
|
|
525 |
|
Minority
Interest
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
29 |
|
|
|
- |
|
|
|
29 |
|
Shareholders’
Equity
|
|
|
5,014 |
|
|
|
4,088 |
|
|
|
8,021 |
|
|
|
(1,639 |
) |
|
|
10,470 |
|
|
|
909 |
|
|
|
(11,379 |
) |
|
|
5,014 |
|
Total
Liabilities and Shareholders’ Equity
|
|
$ |
10,733 |
|
|
$ |
5,290 |
|
|
$ |
9,422 |
|
|
$ |
(1,651 |
) |
|
$ |
13,061 |
|
|
$ |
1,364 |
|
|
$ |
(14,308 |
) |
|
$ |
10,850 |
|
Condensed
Consolidating Statement of Cash Flows for the year ended October 3,
2009
|
|
|
|
|
|
in
millions
|
|
|
|
|
|
|
2014
Guarantors
|
|
|
|
|
|
|
|
|
|
|
|
|
TFI
Parent
|
|
|
TFM
Parent
|
|
|
Guar-antors
|
|
|
Elimin-ations
|
|
|
Subtotal
|
|
|
Non-Guar-antors
|
|
|
Elimin-ations
|
|
|
Total
|
|
Cash
Provided by (Used for) Operating Activities
|
|
$ |
(617 |
) |
|
$ |
507 |
|
|
$ |
1,034 |
|
|
$ |
- |
|
|
$ |
1,541 |
|
|
$ |
126 |
|
|
$ |
(25 |
) |
|
$ |
1,025 |
|
Cash
Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
to property, plant and equipment
|
|
|
- |
|
|
|
(56 |
) |
|
|
(211 |
) |
|
|
- |
|
|
|
(267 |
) |
|
|
(101 |
) |
|
|
- |
|
|
|
(368 |
) |
Change
in restricted cash-investing
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(43 |
) |
|
|
- |
|
|
|
(43 |
) |
Proceeds
from sale of marketable securities, net
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
19 |
|
|
|
- |
|
|
|
19 |
|
Proceeds
from sale of discontinued operation
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
75 |
|
|
|
- |
|
|
|
75 |
|
Acquisitions,
net of cash acquired
|
|
|
- |
|
|
|
- |
|
|
|
(13 |
) |
|
|
- |
|
|
|
(13 |
) |
|
|
(80 |
) |
|
|
- |
|
|
|
(93 |
) |
Other,
net
|
|
|
(37 |
) |
|
|
1 |
|
|
|
12 |
|
|
|
- |
|
|
|
13 |
|
|
|
7 |
|
|
|
- |
|
|
|
(17 |
) |
Cash
Used for Investing Activities
|
|
|
(37 |
) |
|
|
(55 |
) |
|
|
(212 |
) |
|
|
- |
|
|
|
(267 |
) |
|
|
(123 |
) |
|
|
- |
|
|
|
(427 |
) |
Cash
Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
change in debt
|
|
|
545 |
|
|
|
(94 |
) |
|
|
- |
|
|
|
- |
|
|
|
(94 |
) |
|
|
36 |
|
|
|
- |
|
|
|
487 |
|
Debt
issuance costs
|
|
|
(58 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1 |
) |
|
|
- |
|
|
|
(59 |
) |
Change
in restricted cash-financing
|
|
|
- |
|
|
|
- |
|
|
|
(140 |
) |
|
|
- |
|
|
|
(140 |
) |
|
|
- |
|
|
|
- |
|
|
|
(140 |
) |
Purchase
of treasury shares
|
|
|
(19 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(19 |
) |
Dividends
|
|
|
(60 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(25 |
) |
|
|
25 |
|
|
|
(60 |
) |
Other,
net
|
|
|
- |
|
|
|
- |
|
|
|
(52 |
) |
|
|
- |
|
|
|
(52 |
) |
|
|
(7 |
) |
|
|
- |
|
|
|
(59 |
) |
Net
change in intercompany balances
|
|
|
106 |
|
|
|
(358 |
) |
|
|
123 |
|
|
|
- |
|
|
|
(235 |
) |
|
|
129 |
|
|
|
- |
|
|
|
- |
|
Cash
Provided by (Used for) Financing Activities
|
|
|
514 |
|
|
|
(452 |
) |
|
|
(69 |
) |
|
|
- |
|
|
|
(521 |
) |
|
|
132 |
|
|
|
25 |
|
|
|
150 |
|
Effect
of Exchange Rate Change on Cash
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
6 |
|
|
|
- |
|
|
|
6 |
|
Increase
(Decrease) in Cash and Cash Equivalents
|
|
|
(140 |
) |
|
|
- |
|
|
|
753 |
|
|
|
- |
|
|
|
753 |
|
|
|
141 |
|
|
|
- |
|
|
|
754 |
|
Cash
and Cash Equivalents at Beginning of Year
|
|
|
140 |
|
|
|
- |
|
|
|
35 |
|
|
|
- |
|
|
|
35 |
|
|
|
75 |
|
|
|
- |
|
|
|
250 |
|
Cash
and Cash Equivalents at End of Year
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
788 |
|
|
$ |
- |
|
|
$ |
788 |
|
|
$ |
216 |
|
|
$ |
- |
|
|
$ |
1,004 |
|
Condensed
Consolidating Statement of Cash Flows for the year ended September 27,
2008
|
|
|
|
|
|
in
millions
|
|
|
|
|
|
|
2014
Guarantors
|
|
|
|
|
|
|
|
|
|
|
|
|
TFI
Parent
|
|
|
TFM
Parent
|
|
|
Guar-antors
|
|
|
Elimin-ations
|
|
|
Subtotal
|
|
|
Non-Guar-antors
|
|
|
Elimin-ations
|
|
|
Total
|
|
Cash
Provided by (Used for) Operating Activities
|
|
$ |
(223 |
) |
|
$ |
276 |
|
|
$ |
256 |
|
|
$ |
- |
|
|
$ |
532 |
|
|
$ |
(6 |
) |
|
$ |
(15 |
) |
|
$ |
288 |
|
Cash
Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
to property, plant and equipment
|
|
|
(2 |
) |
|
|
(104 |
) |
|
|
(302 |
) |
|
|
- |
|
|
|
(406 |
) |
|
|
(17 |
) |
|
|
- |
|
|
|
(425 |
) |
Proceeds
from sale of investments
|
|
|
14 |
|
|
|
7 |
|
|
|
1 |
|
|
|
- |
|
|
|
8 |
|
|
|
- |
|
|
|
- |
|
|
|
22 |
|
Purchases
of marketable securities, net
|
|
|
(1 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2 |
) |
|
|
- |
|
|
|
(3 |
) |
Other,
net
|
|
|
13 |
|
|
|
4 |
|
|
|
15 |
|
|
|
- |
|
|
|
19 |
|
|
|
(25 |
) |
|
|
- |
|
|
|
7 |
|
Cash
Provided by (Used for) Investing Activities
|
|
|
24 |
|
|
|
(93 |
) |
|
|
(286 |
) |
|
|
- |
|
|
|
(379 |
) |
|
|
(44 |
) |
|
|
- |
|
|
|
(399 |
) |
Cash
Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
change in debt
|
|
|
145 |
|
|
|
(5 |
) |
|
|
- |
|
|
|
- |
|
|
|
(5 |
) |
|
|
(51 |
) |
|
|
- |
|
|
|
89 |
|
Net
proceeds from Class A stock offering
|
|
|
274 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
274 |
|
Convertible
note hedge transactions
|
|
|
(94 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(94 |
) |
Warrant
transactions
|
|
|
44 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
44 |
|
Purchase
of treasury shares
|
|
|
(30 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(30 |
) |
Dividends
|
|
|
(56 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(15 |
) |
|
|
15 |
|
|
|
(56 |
) |
Other,
net
|
|
|
72 |
|
|
|
2 |
|
|
|
- |
|
|
|
- |
|
|
|
2 |
|
|
|
20 |
|
|
|
- |
|
|
|
94 |
|
Net
change in intercompany balances
|
|
|
(19 |
) |
|
|
(180 |
) |
|
|
62 |
|
|
|
- |
|
|
|
(118 |
) |
|
|
137 |
|
|
|
- |
|
|
|
- |
|
Cash
Provided by (Used for) Financing Activities
|
|
|
336 |
|
|
|
(183 |
) |
|
|
62 |
|
|
|
- |
|
|
|
(121 |
) |
|
|
91 |
|
|
|
15 |
|
|
|
321 |
|
Effect
of Exchange Rate Change on Cash
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2 |
) |
|
|
- |
|
|
|
(2 |
) |
Increase
in Cash and Cash Equivalents
|
|
|
137 |
|
|
|
- |
|
|
|
32 |
|
|
|
- |
|
|
|
32 |
|
|
|
39 |
|
|
|
- |
|
|
|
208 |
|
Cash
and Cash Equivalents at Beginning of Year
|
|
|
3 |
|
|
|
- |
|
|
|
3 |
|
|
|
- |
|
|
|
3 |
|
|
|
36 |
|
|
|
- |
|
|
|
42 |
|
Cash
and Cash Equivalents at End of Year
|
|
$ |
140 |
|
|
$ |
- |
|
|
$ |
35 |
|
|
$ |
- |
|
|
$ |
35 |
|
|
$ |
75 |
|
|
$ |
- |
|
|
$ |
250 |
|
Condensed
Consolidating Statement of Cash Flows for the year ended September 29,
2007
|
|
|
|
|
|
in
millions
|
|
|
|
|
|
|
2014
Guarantors
|
|
|
|
|
|
|
|
|
|
|
|
|
TFI
Parent
|
|
|
TFM
Parent
|
|
|
Guar-antors
|
|
|
Elimin-ations
|
|
|
Subtotal
|
|
|
Non-Guar-antors
|
|
|
Elimin-ations
|
|
|
Total
|
|
Cash
Provided by (Used for) Operating Activities
|
|
$ |
177 |
|
|
$ |
283 |
|
|
$ |
261 |
|
|
$ |
- |
|
|
$ |
544 |
|
|
$ |
(18 |
) |
|
$ |
(25 |
) |
|
$ |
678 |
|
Cash
Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
to property, plant and equipment
|
|
|
(14 |
) |
|
|
(40 |
) |
|
|
(204 |
) |
|
|
- |
|
|
|
(244 |
) |
|
|
(27 |
) |
|
|
- |
|
|
|
(285 |
) |
Proceeds
from sale of short-term investment
|
|
|
770 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
770 |
|
Proceeds
from sale of marketable securities, net
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
16 |
|
|
|
- |
|
|
|
16 |
|
Other,
net
|
|
|
81 |
|
|
|
(12 |
) |
|
|
9 |
|
|
|
- |
|
|
|
(3 |
) |
|
|
- |
|
|
|
- |
|
|
|
78 |
|
Cash
Provided by (Used for) Investing Activities
|
|
|
837 |
|
|
|
(52 |
) |
|
|
(195 |
) |
|
|
- |
|
|
|
(247 |
) |
|
|
(11 |
) |
|
|
- |
|
|
|
579 |
|
Cash
Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
change in debt
|
|
|
(747 |
) |
|
|
(4 |
) |
|
|
(11 |
) |
|
|
- |
|
|
|
(15 |
) |
|
|
(448 |
) |
|
|
- |
|
|
|
(1,210 |
) |
Purchase
of treasury shares
|
|
|
(61 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(61 |
) |
Dividends
|
|
|
(56 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(25 |
) |
|
|
25 |
|
|
|
(56 |
) |
Other,
net
|
|
|
80 |
|
|
|
(7 |
) |
|
|
- |
|
|
|
- |
|
|
|
(7 |
) |
|
|
2 |
|
|
|
- |
|
|
|
75 |
|
Net
change in intercompany balances
|
|
|
(229 |
) |
|
|
(221 |
) |
|
|
(58 |
) |
|
|
- |
|
|
|
(279 |
) |
|
|
508 |
|
|
|
- |
|
|
|
- |
|
Cash
Provided by (Used for) Financing Activities
|
|
|
(1,013 |
) |
|
|
(232 |
) |
|
|
(69 |
) |
|
|
- |
|
|
|
(301 |
) |
|
|
37 |
|
|
|
25 |
|
|
|
(1,252 |
) |
Effect
of Exchange Rate Change on Cash
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
9 |
|
|
|
- |
|
|
|
9 |
|
Increase
(Decrease) in Cash and Cash Equivalents
|
|
|
1 |
|
|
|
(1 |
) |
|
|
(3 |
) |
|
|
- |
|
|
|
(4 |
) |
|
|
17 |
|
|
|
- |
|
|
|
14 |
|
Cash
and Cash Equivalents at Beginning of Year
|
|
|
2 |
|
|
|
1 |
|
|
|
6 |
|
|
|
- |
|
|
|
7 |
|
|
|
19 |
|
|
|
- |
|
|
|
28 |
|
Cash
and Cash Equivalents at End of Year
|
|
$ |
3 |
|
|
$ |
- |
|
|
$ |
3 |
|
|
$ |
- |
|
|
$ |
3 |
|
|
$ |
36 |
|
|
$ |
- |
|
|
$ |
42 |
|
NOTE
12: FAIR VALUE MEASUREMENTS
As
described in Note 2: Change in Accounting Principles, we adopted fair value
measurement accounting guidance at the beginning of the first quarter fiscal
2009. This guidance defines fair value, establishes a framework for measuring
fair value and expands disclosure requirements about fair value measurements.
This guidance also defines fair value as the price that would be received to
sell an asset or paid to transfer a liability (an exit price) in the principal
or most advantageous market for the asset or liability in an orderly transaction
between market participants on the measurement date. The fair value hierarchy
prescribed by this standard contains three levels as follows:
Level 1 — Unadjusted quoted
prices available in active markets for the identical assets or liabilities at
the measurement date.
Level 2 — Other observable
inputs available at the measurement date, other than quoted prices included in
Level 1, either directly or indirectly, including:
●
|
Quoted
prices for similar assets or liabilities in active
markets;
|
●
|
Quoted
prices for identical or similar assets in non-active
markets;
|
●
|
Inputs
other than quoted prices that are observable for the asset or liability;
and
|
●
|
Inputs
derived principally from or corroborated by other observable market
data.
|
Level 3 — Unobservable inputs
that cannot be corroborated by observable market data and reflect the use of
significant management judgment. These values are generally determined
using pricing models for which the assumptions utilize management’s estimates of
market participant assumptions.
Assets and Liabilities
Measured at Fair Value on a Recurring Basis
The fair
value hierarchy requires the use of observable market data when
available. In instances where the inputs used to measure fair value fall
into different levels of the fair value hierarchy, the fair value measurement
has been determined based on the lowest level input significant to the fair
value measurement in its entirety. Our assessment of the significance of a
particular item to the fair value measurement in its entirety requires judgment,
including the consideration of inputs specific to the asset or liability. The
following table sets forth by level within the fair value hierarchy, our
financial assets and liabilities accounted for at fair value on a recurring
basis at October 3, 2009, according to the valuation techniques we used to
determine their fair values (in millions):
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Netting
(a)
|
|
|
Total
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity
Derivatives
|
|
$ |
- |
|
|
$ |
21 |
|
|
$ |
- |
|
|
$ |
(17 |
) |
|
$ |
4 |
|
Available
for Sale Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
securities
|
|
|
- |
|
|
|
33 |
|
|
|
72 |
|
|
|
- |
|
|
|
105 |
|
Equity
securities
|
|
|
20 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
20 |
|
Deferred
Compensation Assets
|
|
|
2 |
|
|
|
84 |
|
|
|
- |
|
|
|
- |
|
|
|
86 |
|
Total
Assets
|
|
$ |
22 |
|
|
$ |
138 |
|
|
$ |
72 |
|
|
$ |
(17 |
) |
|
$ |
215 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity
Derivatives
|
|
$ |
- |
|
|
$ |
15 |
|
|
$ |
- |
|
|
$ |
(11 |
) |
|
$ |
4 |
|
Foreign
Exchange Forward Contracts
|
|
|
- |
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
1 |
|
Interest
Rate Swap
|
|
|
- |
|
|
|
4 |
|
|
|
- |
|
|
|
(2 |
) |
|
|
2 |
|
Total
Liabilities
|
|
$ |
- |
|
|
$ |
20 |
|
|
$ |
- |
|
|
$ |
(13 |
) |
|
$ |
7 |
|
(a) Our
derivative assets and liabilities are presented in our Consolidated Balance
Sheets on a net basis. We net derivative assets and liabilities, including cash
collateral, when a legally enforceable master netting arrangement exists between
the counterparty to a derivative contract and us. At October 3, 2009, we had
posted $4 million of cash collateral and held no cash collateral with various
counterparties.
The
following table provides a reconciliation between the beginning and ending
balance of debt securities measured at fair value on a recurring basis in the
table above that used significant unobservable inputs (Level 3) (in
millions):
|
|
Debt
|
|
|
|
Securities
|
|
Balance
at September 27, 2008
|
|
$ |
54 |
|
Total
realized and unrealized gains (losses):
|
|
|
|
|
Included
in earnings
|
|
|
(4 |
) |
Included
in other comprehensive income (loss)
|
|
|
4 |
|
Purchases,
issuances and settlements, net
|
|
|
18 |
|
Balance
at October 3, 2009
|
|
$ |
72 |
|
Total
gains (losses) for the period included in earnings
|
|
|
|
|
attributable
to the change in unrealized gains (losses) relating to
|
|
|
|
|
assets
and liabilities still held as of October 3, 2009
|
|
$ |
(4 |
) |
The
following methods and assumptions were used to estimate the fair value of each
class of financial instrument:
Derivative Assets and Liabilities:
Our derivatives, including commodities, foreign exchange forward
contracts and interest rate swap, primarily include exchange-traded and
over-the-counter contracts which are further described in Note 6: Derivative
Financial Instruments. We record our commodity derivatives at fair value using
quoted market prices adjusted for credit and non-performance risk and internal
models that use as their basis readily observable market inputs including
current and forward commodity market prices. Our foreign exchange forward
contracts are recorded at fair value based on quoted prices and spot and forward
currency prices adjusted for credit and non-performance risk. Our interest rate
swap is recorded at fair value based on quoted LIBOR swap rates adjusted for
credit and non-performance risk. We classify these instruments in Level 2 when
quoted market prices can be corroborated utilizing observable current and
forward commodity market prices on active exchanges, observable market
transactions of spot currency rates and forward currency prices or observable
benchmark market rates at commonly quoted intervals.
Available for Sale Securities:
Our investments in marketable debt securities are classified as
available-for-sale and are included in Other Assets in the Consolidated Balance
Sheets. These investments, which are generally long-term in nature with
maturities ranging up to 47 years, are reported at fair value based on pricing
models and quoted market prices adjusted for credit and non-performance risk. We
classify our investments in U.S. government and agency debt securities as Level
2 as fair value is generally estimated using discounted cash flow models that
are primarily industry-standard models that consider various assumptions,
including time value and yield curve as well as other readily available relevant
economic measures. We classify certain corporate, asset-backed and other debt
securities as Level 3 as there is limited activity or less observable inputs
into proprietary valuation models, including estimated prepayment, default and
recovery rates on the underlying portfolio or structured investment
vehicle.
In
October 2008, we received eight million warrants to purchase an equivalent
amount of Syntroleum Corporation common stock for one cent each in return for
our entering into a letter of credit to guarantee all of the Dynamic Fuels’ Gulf
Opportunity Zone tax-exempt bonds (see Note 11: Long-Term Debt) including
Syntroleum Corporation’s 50 percent ownership portion. In April 2009, we
exercised these warrants for eight million shares of Syntroleum Corporation. We
record the shares in Other Assets in the Consolidated Balance Sheets at fair
value based on quoted market prices. We classify the shares as Level 1 as the
fair value is based on unadjusted quoted prices available in active
markets.
The
following balances are as of October 3, 2009:
|
|
in
millions
|
|
|
|
Amortized
Cost Basis
|
|
|
Fair
Value
|
|
|
Unrealized
Gain
(Loss)
|
|
Available
for Sale Securities:
|
|
|
|
|
|
|
|
|
|
Debt
Securities:
|
|
|
|
|
|
|
|
|
|
U.S.
Treasury and Agency
|
|
$ |
33 |
|
|
$ |
33 |
|
|
$ |
- |
|
Corporate
and Asset-Backed (a)
|
|
|
46 |
|
|
|
48 |
|
|
|
2 |
|
Redeemable
Preferred Stock
|
|
|
24 |
|
|
|
24 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
Securities – Common Stock
|
|
|
9 |
|
|
|
20 |
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Amortized
cost basis for Corporate and Asset-Backed debt securities have been
reduced by accumulated other than temporary impairments of $4
million.
|
|
Unrealized
holding gains (losses), net of tax, are excluded from earnings and reported in
other comprehensive income until the security is settled or sold. On a quarterly
basis, we evaluate whether losses related to our available-for-sale securities
are temporary in nature. If losses are determined to be other than temporary,
the loss would be recognized in earnings if we intend, or more likely than not
will be required, to sell the security prior to recovery. For
securities in which we have the intent and ability to hold until maturity,
losses determined to be other than temporary would remain in other comprehensive
income, other than expected credit losses which are recognized in earnings. We
consider many factors in determining whether a loss is temporary, including the
length of time and extent to which the fair value has been below cost, the
financial condition and near-term prospects of the issuer and our ability and
intent to hold the investment for a period of time sufficient to allow for any
anticipated recovery. During fiscal 2009, we recognized $4 million of other than
temporary impairments in earnings, while no amounts were recognized during
fiscal 2008 and 2007. No other than temporary losses have been deferred in other
comprehensive income as of October 3, 2009.
Deferred Compensation Assets:
We maintain two non-qualified deferred compensation plans for certain
executives and other highly compensated employees. Investments are maintained
within a trust and include money market funds, mutual funds and life insurance
policies. The cash surrender value of the life insurance policies is invested
primarily in mutual funds. The investments are recorded at fair value based on
quoted market prices adjusted for credit and non-performance risk and are
included in Other Assets in the Consolidated Balance Sheets. We classify the
investments which have observable market prices in active markets in Level 1 as
these are generally publicly-traded mutual funds. The remaining deferred
compensation assets are classified in Level 2, as fair value can be corroborated
based on observable market data. Realized and unrealized gains (losses) on
deferred compensation are included in earnings.
Assets and Liabilities
Measured at Fair Value on a Nonrecurring Basis
During
fiscal 2009, we had no significant measurements of assets or liabilities at fair
value on a nonrecurring basis subsequent to their initial recognition. As
indicated in Note 2: Change in Accounting Principles, the effective date was
deferred for the aspects of fair value measurements related to nonfinancial
assets and liabilities measured at fair value, but recognized or disclosed at
fair value on a nonrecurring basis. This deferral applies to such items as
nonfinancial assets and liabilities initially measured at fair value in a
business combination (but not measured at fair value in subsequent periods) or
nonfinancial long-lived asset groups measured at fair value for an impairment
assessment.
Other Financial
Instruments
Fair
values for debt are based on quoted market prices or published forward interest
rate curves. Fair value and carrying value for our debt were as follows (in
millions):
|
|
October
3, 2009
|
|
|
September
27, 2008
|
|
|
|
Fair
Value
|
|
|
Carrying
Value
|
|
|
Fair
Value
|
|
|
Carrying
Value
|
|
Total
Debt
|
|
$ |
3,724 |
|
|
$ |
3,552 |
|
|
$ |
2,659 |
|
|
$ |
2,896 |
|
For all
of our other financial instruments, the estimated fair value approximated the
carrying value at October 3, 2009, and September 27, 2008. The carrying value of
our other financial instrument, not otherwise disclosed herein, included notes
receivable, which approximated fair value at October 3, 2009. Notes receivable
are recorded in Other Assets in the Consolidated Balance Sheets and totaled $45
million and $0 at October 3, 2009, and September 27, 2008, respectively. The
fair values were determined using pricing models for which the assumptions
utilize management’s estimates of market participant assumptions.
Concentrations of Credit
Risk
Our
financial instruments exposed to concentrations of credit risk consist primarily
of cash and cash equivalents and accounts receivable. Our 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. We perform periodic credit evaluations of our customers’
financial condition and generally do not require collateral. At October 3, 2009,
and September 27, 2008, 13.0% and 12.2%, respectively, of our net accounts
receivable balance was due from Wal-Mart Stores, Inc. No other single customer
or customer group represents greater than 10% of net accounts
receivable.
NOTE
13: COMPREHENSIVE INCOME (LOSS)
The
components of accumulated other comprehensive income are as
follows:
|
|
|
|
|
in
millions
|
|
|
|
2009
|
|
|
2008
|
|
Accumulated
other comprehensive income:
|
|
|
|
|
|
|
Currency
translation adjustment
|
|
$ |
(21 |
) |
|
$ |
60 |
|
Unrealized
net hedging losses, net of taxes
|
|
|
(2 |
) |
|
|
(8 |
) |
Unrealized
net gain (loss) on investments, net of taxes
|
|
|
9 |
|
|
|
(1 |
) |
Postretirement
benefits reserve adjustments
|
|
|
(20 |
) |
|
|
(10 |
) |
Total
accumulated other comprehensive income (loss)
|
|
$ |
(34 |
) |
|
$ |
41 |
|
The
components of other comprehensive income (loss) are as follows:
|
|
|
|
|
|
|
|
in
millions
|
|
|
|
Before
Tax
|
|
|
Income
Tax
|
|
|
After
Tax
|
|
Fiscal
2009:
|
|
|
|
|
|
|
|
|
|
Currency
translation adjustment
|
|
$ |
(43 |
) |
|
$ |
3 |
|
|
$ |
(40 |
) |
Currency
translation adjustment gain reclassified to loss from discontinued
operation
|
|
|
(41 |
) |
|
|
- |
|
|
|
(41 |
) |
Unrealized
gain on investments
|
|
|
12 |
|
|
|
(5 |
) |
|
|
7 |
|
Loss
on investments reclassified to other income
|
|
|
4 |
|
|
|
(1 |
) |
|
|
3 |
|
Net
change in postretirement liabilities
|
|
|
(11 |
) |
|
|
1 |
|
|
|
(10 |
) |
Net
hedging unrealized loss
|
|
|
(53 |
) |
|
|
23 |
|
|
|
(30 |
) |
Net
hedging loss reclassified to earnings
|
|
|
61 |
|
|
|
(25 |
) |
|
|
36 |
|
Other
comprehensive loss – 2009
|
|
$ |
(71 |
) |
|
$ |
(4 |
) |
|
$ |
(75 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency
translation adjustment
|
|
$ |
(2 |
) |
|
$ |
- |
|
|
$ |
(2 |
) |
Net
change in postretirement liabilities
|
|
|
(10 |
) |
|
|
6 |
|
|
|
(4 |
) |
Investments
unrealized loss
|
|
|
(1 |
) |
|
|
- |
|
|
|
(1 |
) |
Net
hedging unrealized gain
|
|
|
37 |
|
|
|
(14 |
) |
|
|
23 |
|
Net
hedging gain reclassified to earnings
|
|
|
(41 |
) |
|
|
16 |
|
|
|
(25 |
) |
Other
comprehensive loss – 2008
|
|
$ |
(17 |
) |
|
$ |
8 |
|
|
$ |
(9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency
translation adjustment
|
|
$ |
24 |
|
|
$ |
- |
|
|
$ |
24 |
|
Net
change in pension liability, prior to adoption of new accounting guidance
(1)
|
|
|
9 |
|
|
|
(3 |
) |
|
|
6 |
|
Net
hedging unrealized gain
|
|
|
33 |
|
|
|
(13 |
) |
|
|
20 |
|
Net
hedging gain reclassified to earnings
|
|
|
(33 |
) |
|
|
13 |
|
|
|
(20 |
) |
Other
comprehensive income – 2007
|
|
$ |
33 |
|
|
$ |
(3 |
) |
|
$ |
30 |
|
(1)
|
We
adopted new accounting guidance in fiscal 2007 related to defined benefit
and post retirement plans.
|
NOTE
14: STOCK-BASED COMPENSATION
We issue
shares under our stock-based compensation plans by issuing Class A stock from
treasury. The total number of shares available for future grant under the Tyson
Foods, Inc. 2000 Stock Incentive Plan (Incentive Plan) was 22,320,132 at October
3, 2009.
Stock
Options
Shareholders
approved the Incentive Plan in January 2001. The Incentive Plan is administered
by the Compensation Committee of the Board of Directors (Compensation
Committee). The Incentive Plan includes provisions for granting incentive stock
options for shares of Class A stock at a price not less than the fair market
value at the date of grant. Nonqualified stock options may be granted at a price
equal to, less than or more than the fair market value of Class A stock on the
date the option is granted. Stock options under the Incentive Plan generally
become exercisable ratably over two to five years from the date of grant and
must be exercised within 10 years from the date of grant. Our policy is to
recognize compensation expense on a straight-line basis over the requisite
service period for the entire award.
|
|
Shares
Under Option
|
|
|
Weighted
Average Exercise Price Per Share
|
|
|
Weighted
Average Remaining Contractual Life (in Years)
|
|
|
Aggregate
Intrinsic Value (in millions)
|
|
Outstanding,
September 27, 2008
|
|
|
16,906,014 |
|
|
$ |
14.38 |
|
|
|
|
|
|
|
Exercised
|
|
|
(72,590 |
) |
|
|
8.63 |
|
|
|
|
|
|
|
Canceled
|
|
|
(1,495,506 |
) |
|
|
14.47 |
|
|
|
|
|
|
|
Granted
|
|
|
3,255,926 |
|
|
|
4.90 |
|
|
|
|
|
|
|
Outstanding,
October 3, 2009
|
|
|
18,593,844 |
|
|
|
12.73 |
|
|
|
6.2 |
|
|
$ |
237 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable,
October 3, 2009
|
|
|
10,050,940 |
|
|
$ |
13.75 |
|
|
|
4.5 |
|
|
$ |
138 |
|
We grant
stock options once a year. The grant-date fair value of options granted in
fiscal 2009, 2008 and 2007 was $1.29, $5.22 and $5.85, respectively. The fair
value of each option grant is established on the date of grant using a binomial
lattice method for grants awarded after October 1, 2005, and the Black-Scholes
option-pricing model for grants awarded before October 1, 2005. The change to
the binomial lattice method was made to better reflect the exercise behavior of
top management. We use historical volatility for a period of time comparable to
the expected life of the option to determine volatility assumptions. Expected
life is calculated based on the contractual term of each grant and takes into
account the historical exercise and termination behavior of participants.
Risk-free interest rates are based on the five-year Treasury bond rate.
Assumptions as of the grant date used in the fair value calculation of each
year’s grants are outlined in the following table.
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Expected
life
|
|
5.3
years
|
|
|
5.8
years
|
|
|
5.4
years
|
|
Risk-free
interest rate
|
|
|
2.3 |
% |
|
|
3.7 |
% |
|
|
4.6 |
% |
Expected
volatility
|
|
|
34.6 |
% |
|
|
30.9 |
% |
|
|
33.7 |
% |
Expected
dividend yield
|
|
|
3.3 |
% |
|
|
1.1 |
% |
|
|
1.0 |
% |
We
recognized stock-based compensation expense related to stock options, net of
income taxes, of $9 million, $12 million and $11 million, respectively, during
fiscal years 2009, 2008 and 2007, with a $6 million, $7 million and $6 million
related tax benefit. We had 2.4 million, 2.5 million and 1.9 million options
vest in fiscal years 2009, 2008 and 2007, respectively, with a fair value of $15
million, $15 million and $9 million, respectively.
In fiscal
years 2009, 2008 and 2007, we received cash of $1 million, $9 million and $59
million, respectively, for the exercise of stock options. Shares are issued from
treasury for stock option exercises. The related tax benefit realized from stock
options exercised during fiscal years 2009, 2008 and 2007, was $0, $1 million
and $12 million, respectively. The total intrinsic value of options exercised in
fiscal years 2009, 2008 and 2007, was $0, $3 million and $31 million,
respectively. Cash flows resulting from tax deductions in excess of the
compensation cost of those options (excess tax deductions) are classified as
financing cash flows. We realized $0, $0 and $9 million, respectively, in excess
tax deductions during fiscal years 2009, 2008 and 2007, respectively. As of
October 3, 2009, we had $29 million of total unrecognized compensation cost
related to stock option plans that will be recognized over a weighted average
period of 2.7 years.
Restricted
Stock
We issue
restricted stock at the market value as of the date of grant, with restrictions
expiring over periods through 2013. Unearned compensation is recognized over the
vesting period for the particular grant using a straight-line
method.
|
|
Number
of Shares
|
|
|
Weighted
Average Grant-Date Fair Value Per Share
|
|
Weighted
Average Remaining Contractual Life (in Years)
|
Aggregate
Intrinsic Value (in millions)
|
Nonvested,
September 27, 2008
|
|
|
4,765,724 |
|
|
$ |
16.16 |
|
|
|
Granted
|
|
|
726,238 |
|
|
|
9.94 |
|
|
|
Dividends
|
|
|
78,192 |
|
|
|
9.78 |
|
|
|
Vested
|
|
|
(716,542 |
) |
|
|
16.64 |
|
|
|
Forfeited
|
|
|
(196,702 |
) |
|
|
13.79 |
|
|
|
Nonvested,
October 3, 2009
|
|
|
4,656,910 |
|
|
$ |
15.20 |
|
1.8
|
$57
|
As of
October 3, 2009, we had $25 million of total unrecognized compensation cost
related to restricted stock awards that will be recognized over a weighted
average period of 1.8 years.
We
recognized stock-based compensation expense related to restricted stock, net of
income taxes, of $10 million, $11 million and $14 million for years 2009, 2008
and 2007, respectively. The related tax benefit for fiscal years 2009, 2008 and
2007 was $7 million, $6 million and $9 million, respectively. We had 0.7
million, 2.0 million and 3.4 million, respectively, restricted stock awards vest
in fiscal years 2009, 2008 and 2007, with a grant date fair value of $11
million, $24 million and $37 million.
Performance-based
Shares
In July
2003, our Compensation Committee began authorizing us to award performance-based
shares of our Class A stock to certain senior executives. These awards are
typically granted on the first business day of our fiscal year. The vesting of
the performance-based shares is generally over three years and each award
is subject to the attainment of goals determined by the Compensation Committee
prior to the date of the award. We review progress toward the attainment of
goals each quarter during the vesting period. However, the attainment of goals
can be determined only at the end of the vesting period. If the shares vest, the
ultimate cost will be equal to the Class A stock price on the date the shares
vest multiplied by the number of shares awarded for all performance
grants with other than market criteria. For grants with market performance
criteria, the ultimate expense will be the fair value of the probable shares to
vest regardless if the shares actually vest. Total expense recorded related to
performance-based shares was not material for fiscal 2009, 2008 and
2007.
NOTE
15: PENSIONS AND OTHER POSTRETIREMENT BENEFITS
At
October 3, 2009, we had four noncontributory defined benefit pension plans
consisting of three funded qualified plans and one unfunded non-qualified
plan. All three of our qualified plans are frozen and provide
benefits based on a formula using years of service and a specified benefit rate.
Effective January 1, 2004, we implemented a non-qualified defined benefit
plan for certain contracted officers that uses a formula based on years of
service and final average salary. We also have other postretirement benefit
plans for which substantially all of our employees may receive benefits if they
satisfy applicable eligibility criteria. The postretirement healthcare plans are
contributory with participants’ contributions adjusted when deemed
necessary.
We have
defined contribution retirement and incentive benefit programs for various
groups of employees. We recognized expenses of $49 million, $48 million and $46
million in fiscal 2009, 2008 and 2007, respectively.
We use a
fiscal year end measurement date for our defined benefit plans and other
postretirement plans. We generally recognize the effect of actuarial gains and
losses into earnings immediately for other postretirement plans rather than
amortizing the effect over future periods.
Other
postretirement benefits include postretirement medical costs and life
insurance.
Benefit
obligations and funded status
The
following table provides a reconciliation of the changes in the plans’ benefit
obligations, assets and funded status at October 3, 2009, and September 27,
2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in
millions
|
|
|
|
Pension
Benefits
|
|
|
Other
Postretirement
|
|
|
|
Qualified
|
|
|
Non-Qualified
|
|
|
Benefits
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Change
in benefit obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit
obligation at beginning of year
|
|
$ |
90 |
|
|
$ |
98 |
|
|
$ |
32 |
|
|
$ |
30 |
|
|
$ |
47 |
|
|
$ |
49 |
|
Service
cost
|
|
|
- |
|
|
|
- |
|
|
|
4 |
|
|
|
3 |
|
|
|
- |
|
|
|
1 |
|
Interest
cost
|
|
|
6 |
|
|
|
6 |
|
|
|
2 |
|
|
|
2 |
|
|
|
3 |
|
|
|
3 |
|
Plan
participants’ contributions
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2 |
|
|
|
2 |
|
Actuarial
(gain) loss
|
|
|
- |
|
|
|
(6 |
) |
|
|
2 |
|
|
|
(2 |
) |
|
|
1 |
|
|
|
1 |
|
Benefits
paid
|
|
|
(7 |
) |
|
|
(8 |
) |
|
|
(2 |
) |
|
|
(1 |
) |
|
|
(7 |
) |
|
|
(9 |
) |
Benefit
obligation at end of year
|
|
|
89 |
|
|
|
90 |
|
|
|
38 |
|
|
|
32 |
|
|
|
46 |
|
|
|
47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in plan assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of plan assets at beginning of year
|
|
|
79 |
|
|
|
97 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Actual
return on plan assets
|
|
|
(5 |
) |
|
|
(11 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Employer
contributions
|
|
|
1 |
|
|
|
1 |
|
|
|
2 |
|
|
|
1 |
|
|
|
5 |
|
|
|
7 |
|
Plan
participants’ contributions
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2 |
|
|
|
1 |
|
Benefits
paid
|
|
|
(7 |
) |
|
|
(8 |
) |
|
|
(2 |
) |
|
|
(1 |
) |
|
|
(7 |
) |
|
|
(8 |
) |
Fair
value of plan assets at end of year
|
|
|
68 |
|
|
|
79 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded
status
|
|
$ |
(21 |
) |
|
$ |
(11 |
) |
|
$ |
(38 |
) |
|
$ |
(32 |
) |
|
$ |
(46 |
) |
|
$ |
(47 |
) |
Amounts
recognized in the Consolidated Balance Sheets consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in
millions
|
|
|
|
Pension
Benefits
|
|
|
Other
Postretirement
|
|
|
|
Qualified
|
|
|
Non-Qualified
|
|
|
Benefits
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Accrued
benefit liability
|
|
$ |
(21 |
) |
|
$ |
(11 |
) |
|
$ |
(38 |
) |
|
$ |
(32 |
) |
|
$ |
(46 |
) |
|
$ |
(47 |
) |
Accumulated
other comprehensive (income)/loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized
actuarial loss
|
|
|
35 |
|
|
|
24 |
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Unrecognized
prior service (cost)/credit
|
|
|
- |
|
|
|
- |
|
|
|
4 |
|
|
|
4 |
|
|
|
(8 |
) |
|
|
(9 |
) |
Net
amount recognized
|
|
$ |
14 |
|
|
$ |
13 |
|
|
$ |
(33 |
) |
|
$ |
(28 |
) |
|
$ |
(54 |
) |
|
$ |
(56 |
) |
The
increase (decrease) in the pretax minimum liability related to our pension plans
included in other comprehensive income (loss) was $12 million, $9 million and
$(9) million in fiscal 2009, 2008 and 2007, respectively.
At
October 3, 2009, and September 27, 2008, all pension plans had an accumulated
benefit obligation in excess of plan assets. The accumulated benefit obligation
for all qualified pension plans was $89 million and $90 million at October 3,
2009, and September 27, 2008, respectively. Plans with accumulated benefit
obligations in excess of plan assets are as follows:
|
|
|
|
|
|
|
|
in
millions
|
|
|
|
Pension
Benefits
|
|
|
|
Qualified
|
|
|
Non-Qualified
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Projected
benefit obligation
|
|
$ |
89 |
|
|
$ |
90 |
|
|
$ |
38 |
|
|
$ |
32 |
|
Accumulated
benefit obligation
|
|
|
89 |
|
|
|
90 |
|
|
|
37 |
|
|
|
31 |
|
Fair
value of plan assets
|
|
|
68 |
|
|
|
79 |
|
|
|
- |
|
|
|
- |
|
Net
Periodic Benefit Cost
Components
of net periodic benefit cost for pension and postretirement benefit plans
recognized in the Consolidated Statements of Income are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in
millions
|
|
|
|
Pension
Benefits
|
|
|
Other
Postretirement
|
|
|
|
Qualified
|
|
|
Non-Qualified
|
|
|
Benefits
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Service
cost
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
4 |
|
|
$ |
3 |
|
|
$ |
6 |
|
|
$ |
- |
|
|
$ |
1 |
|
|
$ |
1 |
|
Interest
cost
|
|
|
6 |
|
|
|
6 |
|
|
|
5 |
|
|
|
2 |
|
|
|
2 |
|
|
|
2 |
|
|
|
3 |
|
|
|
3 |
|
|
|
4 |
|
Expected
return on plan assets
|
|
|
(7 |
) |
|
|
(7 |
) |
|
|
(7 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Amortization
of prior service cost
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
|
|
- |
|
|
|
(1 |
) |
|
|
(2 |
) |
Recognized
actuarial loss, net
|
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1 |
|
|
|
1 |
|
|
|
12 |
|
Curtailment
and settlement gain
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(27 |
) |
Net
periodic benefit cost
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
(1 |
) |
|
$ |
7 |
|
|
$ |
6 |
|
|
$ |
9 |
|
|
$ |
4 |
|
|
$ |
4 |
|
|
$ |
(12 |
) |
Assumptions
Weighted
average assumptions are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
Benefits
|
|
|
Other
Postretirement
|
|
|
|
Qualified
|
|
|
Non-Qualified
|
|
|
Benefits
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Discount
rate to determine net periodic benefit cost
|
|
|
6.36 |
% |
|
|
6.33 |
% |
|
|
5.93 |
% |
|
|
6.50 |
% |
|
|
6.25 |
% |
|
|
6.00 |
% |
|
|
6.50 |
% |
|
|
6.25 |
% |
|
|
6.00 |
% |
Discount
rate to determine benefit obligations
|
|
|
6.00 |
% |
|
|
5.88 |
% |
|
|
5.39 |
% |
|
|
6.00 |
% |
|
|
6.50 |
% |
|
|
6.25 |
% |
|
|
5.71 |
% |
|
|
6.50 |
% |
|
|
6.25 |
% |
Rate
of compensation increase
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
3.50 |
% |
|
|
3.50 |
% |
|
|
3.50 |
% |
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
Expected
return on plan assets
|
|
|
8.00 |
% |
|
|
8.02 |
% |
|
|
7.89 |
% |
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
To
determine the rate-of-return on assets assumption, we first examined historical
rates of return for the various asset classes. We then determined a long-term
projected rate-of-return based on expected returns over the next five to 10
years.
We have
three postretirement health plans. Two of these consist of fixed, annual
payments and account for $33 million of the postretirement medical obligation at
October 3, 2009. A healthcare cost trend is not required to determine this
obligation. The remaining plan accounts for $13 million of the postretirement
medical obligation at October 3, 2009. The plan covers retirees who do not yet
qualify for Medicare and uses a healthcare cost trend of 9% in the current year,
grading down to 6% in fiscal 2012. A one-percentage point change in assumed
healthcare cost trend rate would have an immaterial impact on the postretirement
benefit obligation and total service and interest cost.
Plan
Assets
The fair
value of plan assets for domestic pension benefit plans was $54 million and $64
million as of October 3, 2009, and September 27, 2008, respectively. The
following table sets forth the actual and target asset allocation for pension
plan assets:
|
|
|
|
|
|
|
|
Target
Asset
|
|
|
|
2009
|
|
|
2008
|
|
|
Allocation
|
|
Cash
|
|
|
0.2 |
% |
|
|
0.9 |
% |
|
|
1.0 |
% |
Fixed
income securities
|
|
|
19.7 |
|
|
|
31.1 |
|
|
|
19.0 |
|
US
Stock Funds
|
|
|
43.2 |
|
|
|
44.1 |
|
|
|
45.0 |
|
International
Stock Funds
|
|
|
20.2 |
|
|
|
18.8 |
|
|
|
20.0 |
|
Real
Estate
|
|
|
4.7 |
|
|
|
5.1 |
|
|
|
5.0 |
|
Alternatives
|
|
|
12.0 |
|
|
|
- |
|
|
|
10.0 |
|
Total
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
A foreign
subsidiary pension plan had $14 million and $15 million in plan assets at
October 3, 2009, and September 27, 2008, respectively. All of this plan’s assets
are held in annuity contracts consistent with its target asset
allocation.
The Plan
Trustees have established a set of investment objectives related to the assets
of the pension plans and regularly monitor the performance of the funds and
portfolio managers. Objectives for the pension assets are (1) to
provide growth of capital and income, (2) to achieve a target weighted average
annual rate of return competitive with other funds with similar investment
objectives and (3) to diversify to reduce risk. The investment objectives and
target asset allocation were adopted in January 2004 and amended in November
2008. Alternative investments may include, but not limited to, hedge funds,
private equity funds and fixed income funds.
Contributions
Our
policy is to fund at least the minimum contribution required to meet applicable
federal employee benefit and local tax laws. In our sole discretion, we may from
time to time fund additional amounts. Expected contributions to pension plans
for fiscal 2010 are approximately $4 million. For fiscal 2009, 2008 and 2007, we
funded $2 million, $2 million and $5 million, respectively, to defined benefit
plans.
Estimated
Future Benefit Payments
The
following benefit payments are expected to be paid:
|
|
|
|
|
|
|
|
in
millions
|
|
|
|
Pension
Benefits
|
|
|
Other
Postretirement
|
|
|
|
Qualified
|
|
|
Non-Qualified
|
|
|
Benefits
|
|
2010
|
|
$ |
6 |
|
|
$ |
2 |
|
|
$ |
6 |
|
2011
|
|
|
9 |
|
|
|
2 |
|
|
|
5 |
|
2012
|
|
|
8 |
|
|
|
2 |
|
|
|
5 |
|
2013
|
|
|
7 |
|
|
|
2 |
|
|
|
5 |
|
2014
|
|
|
7 |
|
|
|
2 |
|
|
|
5 |
|
2015-2019
|
|
|
31 |
|
|
|
17 |
|
|
|
20 |
|
The above
benefit payments for other postretirement benefit plans are not expected to be
offset by Medicare Part D subsidies in 2010 or thereafter.
NOTE
16: SUPPLEMENTAL CASH FLOW INFORMATION
The
following table summarizes cash payments for interest and income
taxes:
|
|
|
|
|
|
|
|
in
millions
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Interest
|
|
$ |
333 |
|
|
$ |
211 |
|
|
$ |
262 |
|
Income
taxes, net of refunds
|
|
|
35 |
|
|
|
51 |
|
|
|
97 |
|
NOTE
17: TRANSACTIONS WITH RELATED PARTIES
We have
operating leases for farms, equipment and other facilities with Don Tyson, a
director of the Company, John Tyson, Chairman of the Company, certain members of
their families and the Randal W. Tyson Testamentary Trust. Total payments of $3
million in fiscal 2009, $3 million in fiscal 2008, and $5 million in fiscal
2007, were paid to entities in which these parties had an ownership
interest.
In 2008,
a lawsuit captioned In re Tyson Foods, Inc. Consolidated Shareholder’s
Litigation was settled. Pursuant to the settlement, Don Tyson and the
Tyson Limited Partnership paid us $4.5 million.
NOTE
18: INCOME TAXES
Detail of
the provision for income taxes from continuing operations consists of the
following:
|
|
|
|
|
|
|
|
in
millions
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Federal
|
|
$ |
12 |
|
|
$ |
56 |
|
|
$ |
129 |
|
State
|
|
|
(2 |
) |
|
|
8 |
|
|
|
16 |
|
Foreign
|
|
|
4 |
|
|
|
4 |
|
|
|
(3 |
) |
|
|
$ |
14 |
|
|
$ |
68 |
|
|
$ |
142 |
|
Current
|
|
$ |
40 |
|
|
$ |
33 |
|
|
$ |
137 |
|
Deferred
|
|
|
(26 |
) |
|
|
35 |
|
|
|
5 |
|
|
|
$ |
14 |
|
|
$ |
68 |
|
|
$ |
142 |
|
The
reasons for the difference between the statutory federal income tax rate and our
effective income tax rate from continuing operations are as
follows:
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Federal
income tax rate
|
|
|
35.0 |
% |
|
|
35.0 |
% |
|
|
35.0 |
% |
State
income taxes, excluding unrecognized tax benefits
|
|
|
(0.1 |
) |
|
|
2.0 |
|
|
|
2.3 |
|
Extraterritorial
income exclusion
|
|
|
- |
|
|
|
- |
|
|
|
(1.1 |
) |
Unrecognized
tax benefits, net
|
|
|
(0.3 |
) |
|
|
4.4 |
|
|
|
(4.6 |
) |
Medicare
Part D
|
|
|
- |
|
|
|
(0.8 |
) |
|
|
3.2 |
|
Goodwill
impairment
|
|
|
(37.2 |
) |
|
|
- |
|
|
|
- |
|
General
business credits
|
|
|
2.3 |
|
|
|
(3.8 |
) |
|
|
(2.6 |
) |
Domestic
production deduction
|
|
|
0.5 |
|
|
|
(2.2 |
) |
|
|
(1.0 |
) |
Fixed
asset tax cost correction
|
|
|
- |
|
|
|
- |
|
|
|
4.2 |
|
Officers
life insurance
|
|
|
(0.3 |
) |
|
|
3.8 |
|
|
|
(1.4 |
) |
Change
in state valuation allowance
|
|
|
- |
|
|
|
5.0 |
|
|
|
- |
|
Change
in foreign valuation allowance
|
|
|
(3.9 |
) |
|
|
- |
|
|
|
- |
|
Tax
planning in foreign jurisdictions
|
|
|
1.8 |
|
|
|
- |
|
|
|
- |
|
Other
|
|
|
(0.5 |
) |
|
|
1.2 |
|
|
|
0.6 |
|
|
|
|
(2.7 |
)% |
|
|
44.6 |
% |
|
|
34.6 |
% |
The
fiscal 2009 goodwill impairment is non-deductible for income tax purposes and
negatively impacted our effective income tax rate by 37.2%. During fiscal 2009,
our tax expense was impacted by an increase in foreign valuation allowance which
increased tax expense by $21 million, estimated general business credits which
decreased tax expense by $12 million, and tax planning in foreign jurisdictions
which decreased tax expense by $9 million.
During
fiscal 2008, an increase in the state valuation allowance increased tax expense
by $8 million, while non-deductible activity relating to company-owned life
insurance increased tax expense by $6 million. The addition of unrecognized tax
benefits in fiscal 2008 caused a net increase to income tax expense of $7
million. Additionally, estimated general business credits decreased fiscal 2008
tax expense by $6 million.
During
fiscal 2007, we discovered a certain population of our tax cost and accumulated
depreciation values were not accurately recorded, primarily related to a
property, plant and equipment system conversion in 1999. This system conversion
did not impact the recorded book value of the property, plant and equipment. As
a result, the net tax basis of property, plant and equipment was overstated,
which caused the deferred tax liability in our financial statements to
be understated. In fiscal 2007, we increased our deferred tax liabilities
$17 million and recognized additional tax expense of $17 million. Additionally,
the fiscal 2007 effective tax rate was reduced by 4.6% due to the reduction of
income tax reserves management deemed were no longer required. The net reduction
to current income tax expense of approximately $20 million related to Internal
Revenue Service examinations, appeals and United States Tax Court settlement
activity, as well as state income tax examination settlements. Additional
related adjustments resulted in a $28 million reduction of
goodwill.
We
recognize deferred income taxes for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be recovered
or settled.
The tax
effects of major items recorded as deferred tax assets and liabilities are as
follows:
|
|
|
|
|
|
|
|
|
|
|
in
millions
|
|
|
|
2009
|
|
|
2008
|
|
|
|
Deferred
Tax
|
|
|
Deferred
Tax
|
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Assets
|
|
|
Liabilities
|
|
Property,
plant and equipment
|
|
$ |
- |
|
|
$ |
339 |
|
|
$ |
- |
|
|
$ |
365 |
|
Suspended
taxes from conversion to accrual method
|
|
|
- |
|
|
|
91 |
|
|
|
- |
|
|
|
96 |
|
Intangible
assets
|
|
|
- |
|
|
|
34 |
|
|
|
- |
|
|
|
30 |
|
Inventory
|
|
|
19 |
|
|
|
76 |
|
|
|
13 |
|
|
|
89 |
|
Accrued
expenses
|
|
|
151 |
|
|
|
- |
|
|
|
167 |
|
|
|
- |
|
Net
operating loss and other carryforwards
|
|
|
103 |
|
|
|
- |
|
|
|
124 |
|
|
|
- |
|
Note
hedge transactions
|
|
|
30 |
|
|
|
- |
|
|
|
36 |
|
|
|
- |
|
Insurance
reserves
|
|
|
22 |
|
|
|
- |
|
|
|
22 |
|
|
|
- |
|
Prepaids
|
|
|
- |
|
|
|
20 |
|
|
|
- |
|
|
|
23 |
|
Other
|
|
|
114 |
|
|
|
54 |
|
|
|
58 |
|
|
|
48 |
|
|
|
$ |
439 |
|
|
$ |
614 |
|
|
$ |
420 |
|
|
$ |
651 |
|
Valuation
allowance
|
|
$ |
(75 |
) |
|
|
|
|
|
$ |
(49 |
) |
|
|
|
|
Net
deferred tax liability
|
|
|
|
|
|
$ |
250 |
|
|
|
|
|
|
$ |
280 |
|
We record
deferred tax amounts in Other Current Assets and in Deferred Income Taxes on the
Consolidated Balance Sheets.
The
deferred tax liability for suspended taxes from conversion to accrual method
represents the 1987 change from the cash to accrual method of accounting and
will be recognized by 2027.
At
October 3, 2009, our gross federal tax net operating loss carryforward
approximated $45 million. This carryforward expires in fiscal year 2024. Gross
state tax net operating loss carryforwards approximated $803 million and expire
in fiscal years 2010 through 2028. Gross foreign net operating loss
carryforwards approximated $143 million, of which $87 million expire in fiscal
years 2011 through 2019, and the remainder has no expiration.
We have
accumulated undistributed earnings of foreign subsidiaries aggregating
approximately $220 million and $219 million at October 3, 2009 and September 27,
2008, respectively. These earnings are expected to be indefinitely reinvested
outside of the United States. If those earnings were distributed in the form of
dividends or otherwise, we would be subject to federal income taxes (subject to
an adjustment for foreign tax credits), state income taxes and withholding taxes
payable to the various foreign countries. It is not currently practicable to
estimate the tax liability that might be payable on the repatriation of these
foreign earnings.
The
following table summarizes the activity related to our gross unrecognized tax
benefits at October 3, 2009, and September 27, 2008.
|
|
|
|
|
in
millions
|
|
|
|
2009
|
|
|
2008
|
|
Balance
as of the beginning of the year
|
|
$ |
220 |
|
|
$ |
210 |
|
Increases
related to current year tax positions
|
|
|
7 |
|
|
|
23 |
|
Increases
related to prior year tax positions
|
|
|
60 |
|
|
|
36 |
|
Reductions
related to prior year tax positions
|
|
|
(21 |
) |
|
|
(28 |
) |
Reductions
related to settlements
|
|
|
(25 |
) |
|
|
(14 |
) |
Reductions
related to expirations of statute of limitations
|
|
|
(8 |
) |
|
|
(7 |
) |
Balance
as of the end of the year
|
|
$ |
233 |
|
|
$ |
220 |
|
The
amount of unrecognized tax benefits, if recognized, that would affect our
effective tax rate was $104 million and $73 million at October 3, 2009 and at
September 27, 2008, respectively. We classify interest and penalties on
unrecognized tax benefits as income tax expense. At October 3, 2009, and at
September 27, 2008, before tax benefits, we had $71 million and $67 million,
respectively, of accrued interest and penalties on unrecognized tax
benefits.
As of
October 3, 2009, we are subject to income tax examinations for U.S. federal
income taxes for fiscal years 1998 through 2008, excluding 2001 and 2002, and
for foreign, state and local income taxes for fiscal years 2001 through
2008. During fiscal 2010, tax audit resolutions could potentially
reduce our unrecognized tax benefits by approximately $19 million, either
because tax positions are sustained on audit or because we agree to their
disallowance.
NOTE
19: EARNINGS (LOSS) PER SHARE
The
earnings and weighted average common shares used in the computation of basic and
diluted earnings (loss) per share are as follows:
|
|
in
millions, except per share data
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
$ |
(536 |
) |
|
$ |
86 |
|
|
$ |
268 |
|
Less
Dividends:
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A ($0.16/share)
|
|
|
50 |
|
|
|
46 |
|
|
|
45 |
|
Class
B ($0.144/share)
|
|
|
10 |
|
|
|
10 |
|
|
|
11 |
|
Undistributed
earnings (losses)
|
|
|
(596 |
) |
|
|
30 |
|
|
|
212 |
|
Class
A undistributed earnings (losses)
|
|
|
(493 |
) |
|
|
25 |
|
|
|
170 |
|
Class
B undistributed earnings (losses)
|
|
|
(103 |
) |
|
|
5 |
|
|
|
42 |
|
Total
undistributed earnings (losses)
|
|
$ |
(596 |
) |
|
$ |
30 |
|
|
$ |
212 |
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
for basic earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A weighted average shares
|
|
|
302 |
|
|
|
281 |
|
|
|
273 |
|
Class
B weighted average shares, and shares under if-converted method for
diluted earnings per share
|
|
|
70 |
|
|
|
70 |
|
|
|
75 |
|
Effect
of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options and restricted stock
|
|
|
- |
|
|
|
5 |
|
|
|
7 |
|
Denominator
for diluted earnings per share – adjusted weighted average shares and
assumed conversions
|
|
|
372 |
|
|
|
356 |
|
|
|
355 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(Loss) Per Share from Continuing Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A Basic
|
|
$ |
(1.47 |
) |
|
$ |
0.25 |
|
|
$ |
0.79 |
|
Class
B Basic
|
|
$ |
(1.32 |
) |
|
$ |
0.22 |
|
|
$ |
0.70 |
|
Diluted
|
|
$ |
(1.44 |
) |
|
$ |
0.24 |
|
|
$ |
0.75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A Basic
|
|
$ |
(1.47 |
) |
|
$ |
0.25 |
|
|
$ |
0.79 |
|
Class
B Basic
|
|
$ |
(1.32 |
) |
|
$ |
0.22 |
|
|
$ |
0.70 |
|
Diluted
|
|
$ |
(1.44 |
) |
|
$ |
0.24 |
|
|
$ |
0.75 |
|
Approximately
24 million, 10 million and 4 million, respectively, in fiscal years 2009, 2008
and 2007, of our stock-based compensation shares were antidilutive and were not
included in the dilutive earnings per share calculation.
We have
two classes of capital stock, Class A stock and Class B stock. Cash dividends
cannot be paid to holders of Class B stock unless they are simultaneously paid
to holders of Class A stock. The per share amount of cash dividends paid to
holders of Class B stock cannot exceed 90% of the cash dividend paid to holders
of Class A stock.
We
allocate undistributed earnings (losses) based upon a 1 to 0.9 ratio per share
of Class A stock and Class B stock, respectively. We allocate undistributed
earnings (losses) based on this ratio due to historical dividend patterns,
voting control of Class B shareholders and contractual limitations of dividends
to Class B stock.
NOTE
20: SEGMENT REPORTING
We
operate in four segments: Chicken, Beef, Pork and Prepared Foods. We measure
segment profit as operating income (loss).
Chicken: Chicken operations
include breeding and raising chickens, as well as processing live chickens into
fresh, frozen and value-added chicken products and logistics operations to move
products through the supply chain. Products are marketed domestically to food
retailers, foodservice distributors, restaurant operators and noncommercial
foodservice establishments such as schools, hotel chains, healthcare facilities,
the military and other food processors, as well as to international markets. It
also includes sales from allied products and our chicken breeding stock
subsidiary.
Beef: Beef operations include
processing live fed cattle and fabricating dressed beef carcasses into primal
and sub-primal meat cuts and case-ready products. This segment also includes
sales from allied products such as hides and variety meats, as well as logistics
operations to move products through the supply chain. Products are marketed
domestically to food retailers, foodservice distributors, restaurant operators
and noncommercial foodservice establishments such as schools, hotel chains,
healthcare facilities, the military and other food processors, as well as to
international markets. Allied products are marketed to manufacturers of
pharmaceuticals and technical products.
Pork: Pork operations include
processing live market hogs and fabricating pork carcasses into primal and
sub-primal cuts and case-ready products. This segment also includes our live
swine group, related allied product processing activities and logistics
operations to move products through the supply chain. Products are marketed
domestically to food retailers, foodservice distributors, restaurant operators
and noncommercial foodservice establishments such as schools, hotel chains,
healthcare facilities, the military and other food processors, as well as to
international markets. We sell allied products to pharmaceutical and technical
products manufacturers, as well as a limited number of live swine to pork
processors.
Prepared Foods: Prepared Foods
operations include manufacturing and marketing frozen and refrigerated food
products and logistics operations to move products through the supply chain.
Products include pepperoni, bacon, beef and pork pizza toppings, pizza crusts,
flour and corn tortilla products, appetizers, prepared meals, ethnic foods,
soups, sauces, side dishes, meat dishes and processed meats. Products are
marketed domestically to food retailers, foodservice distributors, restaurant
operators and noncommercial foodservice establishments such as schools, hotel
chains, healthcare facilities, the military and other food processors, as well
as to international markets.
in
millions
|
|
|
|
Chicken
|
|
|
Beef
|
|
|
Pork
|
|
|
Prepared
Foods
|
|
|
Other
|
|
|
Consolidated
|
|
Fiscal
year ended October 3, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$ |
9,660 |
|
|
$ |
10,782 |
|
|
$ |
3,426 |
|
|
$ |
2,836 |
|
|
$ |
- |
|
|
$ |
26,704 |
|
Operating
income (loss)
|
|
|
(157 |
) |
|
|
(346 |
) |
|
|
160 |
|
|
|
133 |
|
|
|
(5 |
) |
|
|
(215 |
) |
Other
expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
311 |
|
Loss
from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
before
income taxes and minority interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(526 |
) |
Depreciation
|
|
|
252 |
|
|
|
103 |
|
|
|
36 |
|
|
|
54 |
|
|
|
- |
|
|
|
445 |
|
Total
assets
|
|
|
4,927 |
|
|
|
2,277 |
|
|
|
840 |
|
|
|
905 |
|
|
|
1,646 |
|
|
|
l0,595 |
|
Additions
to property, plant and equipment
|
|
|
174 |
|
|
|
39 |
|
|
|
18 |
|
|
|
58 |
|
|
|
79 |
|
|
|
368 |
|
Fiscal
year ended September 27, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$ |
8,900 |
|
|
$ |
11,664 |
|
|
$ |
3,587 |
|
|
$ |
2,711 |
|
|
$ |
- |
|
|
$ |
26,862 |
|
Operating
income (loss)
|
|
|
(118 |
) |
|
|
106 |
|
|
|
280 |
|
|
|
63 |
|
|
|
- |
|
|
|
331 |
|
Other
expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
177 |
|
Income
from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
before
income taxes and minority interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
154 |
|
Depreciation
(a)
|
|
|
244 |
|
|
|
117 |
|
|
|
31 |
|
|
|
67 |
|
|
|
- |
|
|
|
459 |
|
Total
assets (b)
|
|
|
4,990 |
|
|
|
3,169 |
|
|
|
898 |
|
|
|
971 |
|
|
|
663 |
|
|
|
10,691 |
|
Additions
to property, plant and equipment (c)
|
|
|
258 |
|
|
|
83 |
|
|
|
21 |
|
|
|
46 |
|
|
|
15 |
|
|
|
423 |
|
Fiscal
year ended September 29, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$ |
8,210 |
|
|
$ |
11,540 |
|
|
$ |
3,314 |
|
|
$ |
2,665 |
|
|
$ |
- |
|
|
$ |
25,729 |
|
Operating
income
|
|
|
325 |
|
|
|
51 |
|
|
|
145 |
|
|
|
92 |
|
|
|
- |
|
|
|
613 |
|
Other
expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
203 |
|
Income
from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
before
income taxes and minority interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
410 |
|
Depreciation
(a)
|
|
|
260 |
|
|
|
120 |
|
|
|
31 |
|
|
|
61 |
|
|
|
- |
|
|
|
472 |
|
Total
assets (b)
|
|
|
4,467 |
|
|
|
3,207 |
|
|
|
814 |
|
|
|
961 |
|
|
|
614 |
|
|
|
10,063 |
|
Additions
to property, plant and equipment (c)
|
|
|
164 |
|
|
|
33 |
|
|
|
10 |
|
|
|
25 |
|
|
|
47 |
|
|
|
279 |
|
a)
|
Excludes
depreciation related to discontinued operation of $9 million and $10
million for fiscal years 2008 and 2007, respectively.
|
b)
|
Excludes
assets held for sale related to discontinued operation of $159 million and
$164 million for fiscal years 2008 and 2007,
respectively.
|
c)
|
Excludes
additions to property, plant and equipment related to discontinued
operation of $2 million and $6 million for fiscal years 2008 and 2007,
respectively.
|
We
allocate expenses related to corporate activities to the segments, while the
related assets and additions to property, plant and equipment remain in
Other.
The Pork
segment had sales of $449 million, $517 million and $515 million for fiscal
years 2009, 2008 and 2007, respectively, from transactions with other operating
segments. The Beef segment had sales of $155 million, $142 million and $111
million for fiscal years 2009, 2008 and 2007, respectively, from transactions
with other operating segments. These sales from intersegment transactions, which
are sold at market prices, were excluded from the segment sales in the above
table.
Our
largest customer, Wal-Mart Stores, Inc., accounted for 13.8%, 13.3% and 13.4% of
consolidated sales in fiscal years 2009, 2008 and 2007, respectively. Sales to
Wal-Mart Stores, Inc. were included in the Chicken, Beef, Pork and Prepared
Foods segments. Any extended discontinuance of sales to this customer could, if
not replaced, have a material impact on our operations.
The
majority of our operations are domiciled in the United States. Approximately
97%, 98% and 98% of sales to external customers for fiscal 2009, 2008 and 2007,
respectively, were sourced from the United States. Approximately $3.2 billion,
$3.4 billion and $3.5 billion, respectively, of property, plant and equipment
were located in the United States at October 3, 2009, September 27, 2008, and
September 29, 2007. Approximately $329 million, $139 million and $125 million of
property, plant and equipment were located in foreign countries, primarily
Brazil, China and Mexico, at fiscal years ended 2009, 2008 and 2007,
respectively.
We sell
certain products in foreign markets, primarily Canada, Central America, China,
the European Union, Japan, Mexico, the Middle East, Russia, South Korea, Taiwan
and Vietnam. Our export sales totaled $2.7 billion, $3.2 billion and $2.5
billion for fiscal 2009, 2008 and 2007, respectively. Substantially all of our
export sales are facilitated through unaffiliated brokers, marketing
associations and foreign sales staffs. Foreign sales, which are sales of
products produced in a country other than the United States, were
less than 10% of consolidated sales for each of fiscal 2009, 2008 and 2007.
Approximately 3%, 22% and 10% of income (loss) from continuing operations before
income taxes and minority interest for fiscal 2009, 2008 and 2007, respectively,
was from foreign operations.
NOTE
21: QUARTERLY FINANCIAL DATA (UNAUDITED)
|
|
|
|
|
in
millions, except per share data
|
|
|
|
First
Quarter
|
|
|
Second
Quarter
|
|
|
Third
Quarter
|
|
|
Fourth
Quarter
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$ |
6,521 |
|
|
$ |
6,307 |
|
|
$ |
6,662 |
|
|
$ |
7,214 |
|
Gross
profit
|
|
|
18 |
|
|
|
253 |
|
|
|
470 |
|
|
|
462 |
|
Operating
income (loss)
|
|
|
(198 |
) |
|
|
29 |
|
|
|
276 |
|
|
|
(322 |
) |
Income
(loss) from continuing operations
|
|
|
(118 |
) |
|
|
(90 |
) |
|
|
127 |
|
|
|
(455 |
) |
Income
(loss) from discontinued operation
|
|
|
6 |
|
|
|
(14 |
) |
|
|
7 |
|
|
|
- |
|
Net
income (loss)
|
|
|
(112 |
) |
|
|
(104 |
) |
|
|
134 |
|
|
|
(455 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) from continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A Basic
|
|
$ |
(0.32 |
) |
|
$ |
(0.25 |
) |
|
$ |
0.35 |
|
|
$ |
(1.25 |
) |
Class
B Basic
|
|
$ |
(0.29 |
) |
|
$ |
(0.22 |
) |
|
$ |
0.31 |
|
|
$ |
(1.12 |
) |
Diluted
|
|
$ |
(0.32 |
) |
|
$ |
(0.24 |
) |
|
$ |
0.33 |
|
|
$ |
(1.22 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) from discontinued operation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A Basic
|
|
$ |
0.02 |
|
|
$ |
(0.04 |
) |
|
$ |
0.02 |
|
|
$ |
0.00 |
|
Class
B Basic
|
|
$ |
0.02 |
|
|
$ |
(0.04 |
) |
|
$ |
0.02 |
|
|
$ |
0.00 |
|
Diluted
|
|
$ |
0.02 |
|
|
$ |
(0.04 |
) |
|
$ |
0.02 |
|
|
$ |
0.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A Basic
|
|
$ |
(0.30 |
) |
|
$ |
(0.29 |
) |
|
$ |
0.37 |
|
|
$ |
(1.25 |
) |
Class
B Basic
|
|
$ |
(0.27 |
) |
|
$ |
(0.26 |
) |
|
$ |
0.33 |
|
|
$ |
(1.12 |
) |
Diluted
|
|
$ |
(0.30 |
) |
|
$ |
(0.28 |
) |
|
$ |
0.35 |
|
|
$ |
(1.22 |
) |
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$ |
6,476 |
|
|
$ |
6,336 |
|
|
$ |
6,849 |
|
|
$ |
7,201 |
|
Gross
profit
|
|
|
315 |
|
|
|
315 |
|
|
|
259 |
|
|
|
357 |
|
Operating
income
|
|
|
94 |
|
|
|
54 |
|
|
|
45 |
|
|
|
138 |
|
Income
(loss) from continuing operations
|
|
|
41 |
|
|
|
3 |
|
|
|
(3 |
) |
|
|
45 |
|
Income
(loss) from discontinued operation
|
|
|
(7 |
) |
|
|
(8 |
) |
|
|
12 |
|
|
|
3 |
|
Net
income (loss)
|
|
|
34 |
|
|
|
(5 |
) |
|
|
9 |
|
|
|
48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) from continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A Basic
|
|
$ |
0.12 |
|
|
$ |
0.01 |
|
|
$ |
(0.01 |
) |
|
$ |
0.13 |
|
Class
B Basic
|
|
$ |
0.11 |
|
|
$ |
0.01 |
|
|
$ |
(0.01 |
) |
|
$ |
0.11 |
|
Diluted
|
|
$ |
0.12 |
|
|
$ |
0.01 |
|
|
$ |
(0.01 |
) |
|
$ |
0.12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) from discontinued operation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A Basic
|
|
$ |
(0.02 |
) |
|
$ |
(0.03 |
) |
|
$ |
0.04 |
|
|
$ |
0.01 |
|
Class
B Basic
|
|
$ |
(0.02 |
) |
|
$ |
(0.02 |
) |
|
$ |
0.03 |
|
|
$ |
0.01 |
|
Diluted
|
|
$ |
(0.02 |
) |
|
$ |
(0.03 |
) |
|
$ |
0.04 |
|
|
$ |
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A Basic
|
|
$ |
0.10 |
|
|
$ |
(0.02 |
) |
|
$ |
0.03 |
|
|
$ |
0.14 |
|
Class
B Basic
|
|
$ |
0.09 |
|
|
$ |
(0.01 |
) |
|
$ |
0.02 |
|
|
$ |
0.12 |
|
Diluted
|
|
$ |
0.10 |
|
|
$ |
(0.02 |
) |
|
$ |
0.03 |
|
|
$ |
0.13 |
|
The
fourth quarter of fiscal 2009 was a 14-week period, while the remaining quarters
in the above table were 13-week periods.
Second
quarter fiscal 2009 operating income included a $15 million charge related to
the closing of a prepared foods processed meats plant. Fourth quarter fiscal
2009 operating loss included a $560 million non-cash charge related to the
partial impairment of the Beef segment’s goodwill.
First
quarter fiscal 2008 income from continuing operations before income taxes
includes an $18 million non-operating gain related to sale of an investment and
a $6 million severance charge related to the FAST initiative. Second quarter
fiscal 2008 income from continuing operations before income taxes includes $47
million in charges related to restructuring a beef plant operation, closing a
poultry plant, impairment of packaging equipment and software impairments. Third
quarter fiscal 2008 loss from continuing operations before income taxes includes
$13 million in charges related to flood damage and impairment of unimproved real
property. Fourth quarter fiscal 2008 income from continuing operations before
income taxes includes a $10 million charge related to intangible asset
impairments.
NOTE
22: CAPITAL STRUCTURE
In
September 2008, we issued 22.4 million shares of Class A stock as part of a
public offering. The shares were offered at $12.75. Net proceeds, after
underwriting discounts and commissions, of approximately $274 million were used
toward the repayment of our borrowings under the accounts receivable
securitization facility and for other general corporate purposes. An entity
controlled by Don Tyson purchased three million shares of Class A stock in this
offering.
During
fiscal 2007, Tyson Limited Partnership converted 15.9 million shares of Class B
stock to Class A stock on a one-for-one basis.
NOTE
23: CONTINGENCIES
Listed
below are certain claims made against the Company and our subsidiaries. In our
opinion, we have made appropriate and adequate reserves, accruals and
disclosures where necessary, and believe the probability of a material loss
beyond the amounts accrued to be remote; however, the ultimate liability for
these matters is uncertain, and if accruals and reserves are not adequate, an
adverse outcome could have a material effect on the consolidated financial
condition or results of operations. We believe we have substantial defenses to
the claims made and intend to vigorously defend these cases.
In 2000,
the Wage and Hour Division of the U.S. Department of Labor (DOL) conducted an
industry-wide investigation of poultry producers, including us, to ascertain
compliance with various wage and hour issues. As part of this investigation, the
DOL inspected 14 of our processing facilities. On May 9, 2002, the DOL filed a
civil complaint styled Elaine L. Chao (now Hilda L. Solis), Secretary of Labor,
United States Department of Labor v. Tyson Foods, Inc. against us in the U.S.
District Court for the Northern District of Alabama. The plaintiffs allege in
the complaint that we violated the overtime provisions of the federal Fair Labor
Standards Act ("FLSA") at our chicken-processing facility in Blountsville,
Alabama. Through discovery and trial, the Secretary of Labor sought to require
us to compensate all hourly chicken processing workers for pre- and post-shift
clothes changing, washing and related activities and for one of two unpaid
30-minute meal periods. The Secretary of Labor sought back wages for all
employees at the Blountsville facility for a period of two years prior to the
date of the filing of the complaint and an injunction against future violations
at that facility and all other chicken processing facilities we operate. The
District Court granted the Company’s motion for partial summary judgment in
part, ruling that the second meal period is appropriately characterized as
non-compensable, and reserved the remaining issues for trial. A jury trial began
on February 2, 2009, and concluded with a mistrial on April 13, 2009, when the
jury failed to reach a unanimous verdict. A second jury trial was
held, beginning on August 25, 2009. The jury reached a verdict on
November 4, 2009, and it determined that Blountsville team members performed
work for which they were not compensated and awarded $250,000 in damages for a
nine-year period. The jury also determined that the Company’s
recordkeeping for hours of work did not violate the FLSA. The court
has ordered the parties to mediation within the next sixty (60) days, and it has
also set a February 15, 2010 trial date for the injunctive phase of
trial.
Several
private lawsuits are pending against us alleging that we failed to compensate
poultry plant employees for all hours worked, including overtime compensation,
in violation of the FLSA. These lawsuits include DeAsencio v. Tyson Foods, Inc.
(DeAsencio), filed on August 22, 2000, in the U.S. District Court for the
Eastern District of Pennsylvania. This matter involves similar allegations that
employees should be paid for the time it takes to engage in pre- and post-shift
activities such as changing into and out of protective and sanitary clothing,
obtaining clothing and walking to and from the changing area, work areas and
break areas. They seek back wages, liquidated damages, pre- and post-judgment
interest, and attorneys’ fees. Plaintiffs appealed a jury verdict and final
judgment entered in our favor on June 22, 2006, in the District Court for the
Eastern District of Pennsylvania. On September 7, 2007, the U.S. Court of
Appeals for the Third Circuit reversed the jury verdict and remanded the case to
the District Court for further proceedings. We sought rehearing en banc, which
was denied by the Court of Appeals on October 5, 2007. The United States Supreme
Court denied our petition for a writ of certiorari on June 9, 2008. The new
trial date has not been set.
In
addition to DeAsencio, several additional private lawsuits were filed against us
since the beginning of fiscal 2007 which allege we failed to compensate poultry
plant employees for all hours worked, including overtime compensation, in
violation of the FLSA. These lawsuits are Sheila Ackles, et al. v.
Tyson Foods, Inc. (N. Dist. Alabama, October 23, 2006); McCluster, et al. v.
Tyson Foods, Inc. (M. Dist. Georgia, December 11, 2006); Dobbins, et al. v.
Tyson Chicken, Inc., et al. (N. Dist. Alabama, December 21, 2006); Buchanan, et
al. v. Tyson Chicken, Inc., et al. and Potter, et al. v. Tyson Chicken, Inc., et
al. (N. Dist. Alabama, December 22, 2006); Jones, et al. v. Tyson Foods, Inc.,
et al., Walton, et al. v. Tyson Foods, Inc., et al. and Williams, et al. v.
Tyson Foods, Inc., et al. (S. Dist. Mississippi, February 9, 2007); Balch, et
al. v. Tyson Foods, Inc. (E. Dist. Oklahoma, March 1, 2007); Adams, et al. v.
Tyson Foods, Inc. (W. Dist. Arkansas, March 2, 2007); Atkins, et al. v. Tyson
Foods, Inc. (M. Dist. Georgia, March 5, 2007); and Laney, et al. v. Tyson Foods,
Inc. and Williams, et al. v. Tyson Foods, Inc. (M. Dist. Georgia, May 23, 2007).
Similar to DeAsencio, each of these matters involves allegations employees
should be paid for the time it takes to engage in pre- and post-shift activities
such as changing into and out of protective and sanitary clothing, obtaining
clothing and walking to and from the changing area, work areas and break areas.
The plaintiffs in each of these lawsuits seek or have sought to act as class
representatives on behalf of all current and former employees who were allegedly
not paid for time worked and seek back wages, liquidated damages, pre- and
post-judgment interest, and attorneys’ fees. On April 6, 2007, we filed a motion
for transfer of the above named actions for coordinated pretrial proceedings
before the Judicial Panel on Multidistrict Litigation. The motion for transfer
was granted on August 17, 2007. The cases listed above and five other cases
subsequently filed involving the same allegations, Armstrong, et al. v. Tyson
Foods, Inc. (W. Dist. Tennessee, January 30, 2008); Maldonado, et al. v. Tyson
Foods, Inc. (E. Dist. Tennessee, January 31, 2008); White, et al. v. Tyson
Foods, Inc. (E. Dist. Texas, February 1, 2008); Meyer, et al. v. Tyson Foods,
Inc. (W. Dist. Missouri, February 2, 2008); and Leak, et al. v. Tyson Foods,
Inc. (W. Dist. North Carolina, February 6, 2008), were transferred to the U.S.
District Court in the Middle District of Georgia, In re: Tyson Foods, Inc., Fair
Labor Standards Act Litigation (“MDL Proceedings”). On January 2, 2008, the
Judge in the MDL Proceedings issued a Joint Scheduling and Case Management
Order. The Order granted Conditional Class Certification and called for notice
to be given to potential putative class members via a third party administrator.
The potential class members had until April 18, 2008, to “opt–in” to the class.
Approximately 13,800 employees and former employees filed their consents to
“opt-in” to the class. On October 15, 2008, the Judge in the MDL Proceedings
denied the plaintiffs’ motion for equitable tolling, which, if granted, would
have extended the time period in which the plaintiffs could have sought damages.
However, in addition to the consents already obtained, the Court allowed
plaintiffs to obtain corrected and reaffirmed opt-in consents that were
previously filed in the matter of M.H. Fox, et al. v. Tyson Foods, Inc. (N.
Dist. Alabama, June 22, 1999). The deadline for filing these consents was
December 31, 2008, and according to the third party administrator, approximately
4,000 reaffirmed consents were filed, some or all of which may be in addition to
the approximately 13,800 consents filed previously. The parties have completed
discovery at eight of our facilities and our corporate headquarters in
Springdale, Arkansas. Discovery may be conducted at additional facilities in the
future. We have filed class decertification motions for the eight facilities
involved in discovery. We have also filed Motions for Partial Summary Judgment
for these eight facilities, and the parties have completed
briefing. The parties have requested oral arguments to further
present their respective positions on these issues. If oral argument
is granted, we anticipate that it will occur in December 2009.
We have
pending eleven separate wage and hour actions involving TFM’s plants
located in Lexington, Nebraska (Lopez, et al. v. Tyson Foods, Inc., District of
Nebraska, June 30, 2006), Garden City and Emporia, Kansas (Garcia, et al. v.
Tyson Foods, Inc., Tyson Fresh Meats, Inc., District of Kansas, May 15, 2006),
Storm Lake, Iowa (Bouaphakeo (f/k/a Sharp), et al. v. Tyson Foods, Inc., N.D.
Iowa, February 6, 2007), Columbus Junction, Iowa (Robinson, et al. v. Tyson
Foods, Inc., d/b/a Tyson Fresh Meats, Inc., S.D. Iowa, September 12, 2007) ,
Joslin, Illinois (Murray, et al. v. Tyson Foods, Inc., C.D. Illinois, January 2,
2008), Dakota City, Nebraska (Gomez, et al. v. Tyson Foods, Inc., District of
Nebraska, January 16, 2008), Madison, Nebraska (Acosta, et al. v Tyson Foods,
Inc. d.b.a Tyson Fresh Meats, Inc., District of Nebraska, February 29, 2008),
Perry and Waterloo, Iowa (Edwards, et al. v. Tyson Foods, Inc. d.b.a Tyson Fresh
Meats, Inc., S.D. Iowa, March 20, 2008); Council Bluffs, Iowa (Maxwell (f/k/a
Salazar), et al. v. Tyson Foods, Inc. d.b.a. Tyson Fresh Meats, Inc., S.D. Iowa,
April 29, 2008; Logansport, Indiana (Carter, et al. v. Tyson Foods, Inc. and
Tyson Fresh Meats, Inc., N.D. Indiana, April 29, 2008); and Goodlettsville,
Tennessee (Abadeer v. Tyson Foods, Inc., and Tyson Fresh Meats, Inc., M.D.
Tennessee, February 6, 2009). The actions allege we failed to pay employees for
all hours worked, including overtime compensation for the time it takes to
change into protective work uniforms, safety equipment and other sanitary
and protective clothing worn by employees, and for walking to and
from the changing area, work areas and break areas in violation of the FLSA
and analogous state laws. The plaintiffs seek back wages, liquidated
damages, pre- and post-judgment interest, attorneys’ fees and costs. Each case
is proceeding in its jurisdiction.
On June
19, 2005, the Attorney General and the Secretary of the Environment of the State
of Oklahoma filed a complaint in the U.S. District Court for the Northern
District of Oklahoma against us, three of our subsidiaries and six other poultry
integrators. This complaint was subsequently amended. As amended, the complaint
asserts a number of state and federal causes of action including, but not
limited to, counts under Comprehensive Environmental Response, Compensation, and
Liability Act (“CERCLA”), Resource Conservation and Recovery Act (“RCRA”), and
state-law public nuisance theories. The amended complaint asserts that
defendants and certain contract growers who are not named in the amended
complaint polluted the surface waters, groundwater and associated drinking water
supplies of the Illinois River Watershed (“IRW”) through the land application of
poultry litter. Oklahoma asserts that this alleged pollution has also caused
extensive injury to the environment (including soils and sediments) of the IRW
and that the defendants have been unjustly enriched. Oklahoma's claims cover the
entire IRW, which encompasses more than one million acres of
land and
the natural resources (including lakes and waterways) contained therein.
Oklahoma seeks wide-ranging relief, including injunctive relief, compensatory
damages in excess of $800 million, an unspecified amount in punitive damages and
attorneys' fees. We and the other defendants have denied liability, asserted
various defenses, and filed a third-party complaint that asserts claims against
other persons and entities whose activities may have contributed to the
pollution alleged in the amended complaint. The district court has stayed
proceedings on the third party complaint pending resolution of Oklahoma's claims
against the defendants. On October 31, 2008, the defendants filed a motion to
dismiss for failure to join the Cherokee Nation as a required party or, in the
alternative, for judgment as a matter of law based on the plaintiffs' lack of
standing. This motion was granted in part and denied in part on July 22, 2009.
In its ruling, the district court dismissed Oklahoma's claims for monetary
damages but denied the motion with respect to the claims for injunctive relief.
On September 2, 2009, the Cherokee Nation filed a motion to intervene in the
lawsuit. Their motion to intervene was denied on September 15, 2009
and the Cherokee Nation filed a notice of appeal of that ruling on September 17,
2009. A non-jury trial of the case began on September 24, 2009 and is
ongoing.
In 2008,
the following thirteen (13) separate lawsuits were filed, with the various
plaintiffs alleging that Tyson falsely advertised chicken products as “raised
without antibiotics” in violation of various state consumer protection statutes:
(Cutsail v. Tyson, 08CV01643 (D. Md.); Cohen v. Tyson, 4:08CV0366 (E.D. Ark.);
Wright v. Tyson, 08CV3022 (D. N.J.); Wilson v. Tyson, 4:08CV0587 (E.D. Ark.);
Gupton v. Tyson, 4:08CV0588 (E.D. Ark.); Kranish v. Tyson, 08CV01619 (D. Md.);
Latimer v. Tyson, 4:08CV004051 (W.D. Ark.); Zukowosky v. Tyson, 4:08CV0584 (E,D,
Ark.); Brickerd v. Tyson, 08CV1796 (D. Md.); Court v. Tyson, 08CV03592 (W.D.
Wash.); Epstein v. Tyson, 08CV2800 (N.D. Cal.); Johnson v. Tyson, 08CV291 (D.
Idaho); and Mize v. Tyson, 08CV4051 (W.D. Ark.)) Plaintiffs in each of these
cases seek to pursue claims on behalf of themselves and proposed classes of
other similarly situated consumers. Plaintiffs in each of these cases seek
compensatory and punitive damages in an unspecified amount in excess of
$5,000,000. Plaintiffs in two of these cases, Cutsail v. Tyson and Cohen v.
Tyson, petitioned the Judicial Panel on Multidistrict Litigation to transfer all
of these actions to a single court for consolidated or coordinated pretrial
proceedings pursuant to 28 U.S.C. 1407. On October 17, 2008, the Judicial Panel
granted the multidistrict litigation petitions and transferred the pending cases
to the District of Maryland. A trial date has not been set. On December 29,
2008, Plaintiff Gupton filed a voluntary dismissal of all her claims. On
December 30, 2008, Plaintiffs Latimer and Mize filed voluntary dismissals of
their claims. These three cases were subsequently
dismissed. Discovery is ongoing in the case.
In
September 2009, the National Water Commission (“CONAGUA”), an agency of the
Mexican government's Ministry of the Environment and Natural Resources, sent an
observation letter to our Mexican subsidiary, Tyson de Mexico (“TdM”), with
respect to TdM's water usage at certain water wells that are part of its poultry
production operations. This letter was in response to TdM's previous
submission to CONAGUA of requested information relating to water usage from
these wells from 2004 to 2007. In the observation letter, which
contains an initial finding of facts, CONAGUA alleges that TdM may have failed
to (i) report accurate water volume usage, (ii) install measuring equipment,
(iii) provide evidence of water use exemptions, (iv) pay for applicable usage,
and (v) properly measure water volume, all as required under water deeds held by
TdM. On October 15, 2009, TdM responded to CONAGUA, denying the
allegations as presented.
Report
of Independent Registered Public Accounting Firm
The
Board of Directors and Shareholders
of Tyson Foods, Inc.
We
have audited the accompanying consolidated balance sheets of Tyson Foods, Inc.
as of October 3, 2009 and September 27, 2008, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the three
years in the period ended October 3, 2009. Our audits also included
the financial statement schedule listed in the Index at Item 15(a). These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require 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 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
October 3, 2009 and September 27, 2008, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
October 3, 2009, in conformity with U.S. generally accepted accounting
principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
As
reflected in the Consolidated Statements of Shareholders’ Equity, the Company
adopted Statement of Financial Accounting Standards Interpretation No. 48
“Accounting for Uncertainty in Income Taxes” (codified in FASB ASC Topic 740,
Income Taxes) in 2008.
We
also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), Tyson Foods, Inc.’s internal control
over financial reporting as of October 3, 2009, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated November 23, 2009,
expressed an unqualified opinion thereon.
/s/
Ernst & Young LLP
Rogers,
Arkansas
November
23, 2009
Report
of Independent Registered Public Accounting Firm
The Board
of Directors and Shareholders
We have
audited Tyson Foods, Inc.’s internal control over financial reporting as of
October 3, 2009, based on criteria established in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (the COSO criteria). Tyson Foods, Inc.’s management is responsible
for maintaining effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over financial reporting
included in the accompanying Report of Management under the caption
“Management’s Report on Internal Control over Financial Reporting”. Our
responsibility is to express an opinion on the Company’s internal control over
financial reporting based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require we plan and
perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe our audit provides a reasonable basis
for our opinion.
A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk controls may become
inadequate because of changes in conditions, or the degree of compliance with
the policies or procedures may deteriorate.
In our
opinion, Tyson Foods, Inc. maintained, in all material respects, effective
internal control over financial reporting as of October 3, 2009, based on the COSO criteria.
We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of Tyson Foods,
Inc. as of October 3, 2009 and September 27, 2008, and the related consolidated
statements of income, shareholders’ equity, and cash flows for each of the three
years in the period ended October 3, 2009, and our report dated November 23,
2009, expressed an unqualified opinion thereon.
/s/ Ernst
& Young LLP
Rogers,
Arkansas
November
23, 2009
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Not
applicable.
ITEM
9A. CONTROLS AND PROCEDURES
Evaluation
of Disclosure Controls and Procedures
An
evaluation was performed, under the supervision and with the participation of
management, including Leland E. Tollett, the former Interim Chief Executive
Officer, and the Chief Financial Officer (CFO), of the effectiveness of the
design and operation of our disclosure controls and procedures (as defined in
Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the 1934
Act)). Based on that evaluation, management, including Mr. Smith, our new Chief
Executive Officer and our CFO, has concluded that, as of October 3, 2009, our
disclosure controls and procedures were effective to ensure that information
required to be disclosed in reports we file or submit under the 1934 Act has
been recorded, processed, summarized and reported in accordance with the rules
and forms of the Securities and Exchange Commission.
Changes
in Internal Control Over Financial Reporting
In the
quarter ended October 3, 2009, there have been no changes in the Company’s
internal control over financial reporting that have materially affected, or are
reasonably likely to materially affect, the Company’s internal control over
financial reporting.
Management’s
Annual Report on Internal Control Over Financial Reporting
Management
is responsible for establishing and maintaining adequate internal control over
financial reporting, as defined in Rules 13a-15(f) of the Securities Exchange
Act of 1934. Our internal control system was designed to provide reasonable
assurance to management and the board of directors regarding the preparation and
fair presentation of published financial statements. Because of its inherent
limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of
changes in conditions, or the degree of compliance with the policies or
procedures may deteriorate. Management conducted an evaluation of the
effectiveness of our internal control over financial reporting as of October 3,
2009. In making this assessment, we used criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control-Integrated Framework.
Based on
this evaluation under the framework in Internal Control – Integrated Framework
issued by COSO, Management concluded the Company’s internal control over
financial reporting was effective as of October 3, 2009.
ITEM
9B. OTHER INFORMATION
On
November 19, 2009, we announced the appointment of Donnie Smith as President and
Chief Executive Officer. In connection with Mr. Smith’s appointment, Leland E.
Tollett stepped down as our Interim President and Chief Executive Officer and
will continue to provide consulting services.
Mr.
Smith, age 50, was previously Senior Group Vice President, Poultry and Prepared
Foods since January 2009, after serving as Group Vice President of Consumer
Products since January 2008, Group Vice President of Logistics and Operations
Services since April 2007, Senior Vice President Information Systems, Purchasing
and Distribution since May 2006, Senior Vice President and Chief Information
Officer since November 2005, and Senior Vice President, Supply Chain Management
since October 2001. Mr. Smith has been employed by the Company since
1980.
Also on
November 19, 2009, we announced the appointment of James V. Lochner as Chief
Operating Officer. Mr. Lochner, age 57, was previously Senior Group Vice
President, Fresh Meats and Margin Optimization since May 2006, after serving as
Senior Group Vice President, Margin Optimization, Purchasing and Logistics since
October 2005, Group Vice President, Purchasing, Travel, and Aviation since
November 2004 and Group Vice President, Fresh Meats since 2001. Mr. Lochner was
initially employed by IBP in 1983.
PART
III
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
See
information set forth under the captions “Election of Directors” and “Section
16(a) Beneficial Ownership Reporting Compliance” in the registrant’s definitive
Proxy Statement for the registrant’s Annual Meeting of Shareholders to be held
February 5, 2010 (the “Proxy Statement”), which information is incorporated
herein by reference. Pursuant to general instruction G(3) of the instructions to
Annual Report on Form 10-K, certain information concerning our executive
officers is included under the caption “Executive Officers of the Company” in
Part I of this Report.
We have a
code of ethics as defined in Item 406 of Regulation S-K, which code applies to
all of our directors and employees, including our principal executive officers,
principal financial officer, principal accounting officer or controller, and
persons performing similar functions. This code of ethics, titled “Tyson Foods,
Inc. Code of Conduct,” is available, free of charge on our website at
http://ir.tyson.com.
ITEM
11. EXECUTIVE COMPENSATION
See the
information set forth under the captions “Executive Compensation,” “Director
Compensation” and “Compensation Committee Interlocks and Insider Participation”
in the Proxy Statement, which information is incorporated herein by reference.
However, pursuant to Instructions to Item 407(e)(5) of the Securities and
Exchange Commission Regulation S-K, the material appearing under the sub-heading
“Compensation Committee Report” shall not be deemed to be “filed” with the
Commission, other than as provided in this Item 11.
ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
See the
information included under the captions “Security Ownership of Certain
Beneficial Owners” and “Security Ownership of Management” in the Proxy
Statement, which information is incorporated herein by reference.
Securities
Authorized for Issuance Under Equity Compensation Plans
The
following information reflects certain information about our equity compensation
plans as of October 3, 2009:
|
|
Equity
Compensation Plan Information
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
|
Number
of Securities to be issued upon exercise of outstanding
options
|
|
|
Weighted
average exercise price of outstanding options
|
|
|
Number
of Securities remaining available for future issuance under equity
compensation plans (excluding Securities reflected in column
(a))
|
|
Equity
compensation plans approved by security holders
|
|
|
18,408,058 |
|
|
$ |
12.78 |
|
|
|
39,498,102 |
|
Equity
compensation plans not approved by security holders
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Total
|
|
|
18,408,058 |
|
|
$ |
12.78 |
|
|
|
39,498,102 |
|
This
table does not include 185,786 options, with a weighted-average exercise price
of $7.96, which were assumed in connection with the acquisition of IBP, inc. in
2001.
|
a)
|
Outstanding
options granted by the Company
|
|
b)
|
Weighted
average price of outstanding options
|
|
c)
|
Shares
available for future issuance as of October 3, 2009, under the Stock
Incentive Plan (22,320,132), the Employee Stock Purchase Plan (9,386,382)
and the Retirement Savings Plan
(7,791,588)
|
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
See the
information included under the captions “Election of Directors” and “Certain
Transactions” in the Proxy Statement, which information is incorporated herein
by reference.
ITEM
14. PRINCIPAL ACCOUNTING FEES AND SERVICES
See the
information included under the captions “Audit Fees,” “Audit-Related Fees,” “Tax
Fees” and “All Other Fees” in the Proxy Statement, which information is
incorporated herein by reference.
PART
IV
ITEM
15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)
|
The
following documents are filed as a part of this report:
|
|
|
|
|
|
Consolidated
Statements of Income
|
|
|
for
the three years ended October 3, 2009
|
|
|
Consolidated
Balance Sheets at
|
|
|
October
3, 2009, and September 27, 2008
|
|
|
Consolidated
Statements of Shareholders’ Equity
|
|
|
for
the three years ended October 3, 2009
|
|
|
Consolidated
Statements of Cash Flows
|
|
|
for
the three years ended October 3, 2009
|
|
|
Notes
to Consolidated Financial Statements
|
|
|
Reports
of Independent Registered Public Accounting Firm
|
|
|
|
|
|
Financial
Statement Schedule - Schedule II Valuation and Qualifying
|
|
|
Accounts
for the three years ended October 3, 2009
|
|
|
|
|
|
All
other schedules are omitted because they are neither applicable nor
required.
|
|
|
|
|
|
The
exhibits filed with this report are listed in the Exhibit Index at the end
of Item 15.
|
|
|
|
|
EXHIBIT
INDEX
Exhibit
No.
3.1
|
Restated
Certificate of Incorporation of the Company (previously filed as Exhibit
3.1 to the Company's Annual Report on Form 10-K for the fiscal year ended
October 3, 1998, Commission File No. 001-14704, and incorporated herein by
reference).
|
|
|
3.2
|
Fourth
Amended and Restated By-laws of the Company (previously filed as Exhibit
3.2 to the Company's Current Report on Form 8-K filed September 28, 2007,
Commission File No. 001-14704, and incorporated herein by
reference).
|
|
|
4.1
|
Indenture
dated June 1, 1995 between the Company and The Chase Manhattan Bank, N.A.,
as Trustee (the “Company Indenture”) (previously filed as Exhibit 4 to
Registration Statement on Form S-3, filed with the Commission on December
18, 1997, Registration No. 333-42525, and incorporated herein by
reference).
|
|
|
4.2
|
Form
of 7.0% Note due January 15, 2028 issued under the Company Indenture
(previously filed as Exhibit 4.2 to the Company's Quarterly Report on Form
10-Q for the period ended December 27, 1997, Commission File No.
001-14704, and incorporated herein by reference).
|
|
|
4.3
|
Form
of 7.0% Note due May 1, 2018 issued under the Company Indenture
(previously filed as Exhibit 4.1 to the Company's Quarterly Report on Form
10-Q for the period ended March 28, 1998, Commission File No. 001-14704,
and incorporated herein by reference).
|
|
|
4.4
|
Supplemental
Indenture between the Company and The Chase Manhattan Bank, N.A., as
Trustee, dated as of October 2, 2001, supplementing the Company Indenture,
together with form of 8.250% Note (previously filed as Exhibit 4.14 to the
Company’s Annual Report on Form 10-K for the fiscal year ended September
29, 2001, Commission File No. 001-14704, and incorporated herein by
reference).
|
|
|
4.5
|
Form
of 6.60% Senior Notes due April 1, 2016 issued under the Company Indenture
(previously filed as Exhibit 4.1 to the Company’s Current Report on Form
8-K filed March 22, 2006, Commission File No. 001-14704, and incorporated
herein by reference).
|
|
|
4.6
|
Supplemental
Indenture among the Company, Tyson Fresh Meats, Inc. and JPMorgan Chase
Bank, National Association, dated as of September 18, 2006, supplementing
the Company Indenture (previously filed as Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed September 19, 2006, Commission File No.
001-14704, and incorporated herein by reference).
|
|
|
4.7
|
Supplemental
Indenture dated as of September 15, 2008, between the Company and The Bank
of New York Mellon Trust Company, National Association (as successor to
JPMorgan Chase Bank, N.A. (formerly The Chase Manhattan Bank, N.A.)), as
Trustee (including the form of 3.25% Convertible Senior Notes due 2013),
supplementing the Company Indenture (previously filed as Exhibit 4.2 to
the Company’s Current Report on Form 8-K filed September 15, 2008,
Commission File No. 001-14704, and incorporated herein by
reference).
|
|
|
4.8
|
Indenture,
dated January 26, 1996, between IBP, inc. (“IBP”) and The Bank of New York
(the “IBP Indenture”) (previously filed as Exhibit 4 to IBP's Registration
Statement on Form S-3, filed with the Commission on November 20, 1995,
Commission File No. 33-64459, and incorporated herein by
reference).
|
|
|
4.9
|
Form
of Senior Note issued under the IBP Indenture for the issuance of (a)
7.125% Senior Notes due February 1, 2026, and (b) 7.95% Senior Notes due
February 1, 2010 (previously filed as Exhibit 4.16 to the Company’s Annual
Report on Form 10-K for the fiscal year ended September 29, 2001,
Commission File No. 001-14704, and incorporated herein by
reference).
|
|
|
4.10
|
First
Supplemental Indenture, dated as of September 28, 2001, among the Company,
Lasso Acquisition Corporation and The Bank of New York, supplementing the
IBP Indenture (previously filed as Exhibit 4.18 to the Company’s Annual
Report on Form 10-K for the fiscal year ended September 29, 2001,
Commission File No. 001-14704, and incorporated herein by
reference).
|
|
|
4.11
|
Indenture,
dated March 9, 2009, among the Company, the Subsidiary Guarantors (as
defined therein) and The Bank of New York Mellon Trust Company, N.A., as
Trustee (previously filed as Exhibit 4.1 to the Company’s Current Report
on Form 8-K filed March 10, 2009, Commission File No. 001-14704, and
incorporated herein by
reference).
|
4.12
|
Form
of 10.50% Senior Note due 2014 (previously filed as Exhibit 4.2 and
included in Exhibit 4.1 to the Company’s Current Report on Form 8-K filed
March 10, 2009, Commission File No. 001-14704, and incorporated herein by
reference).
|
|
|
10.1
|
Credit
Agreement, dated March 9, 2009, among the Company, JPMorgan Chase Bank,
N.A., as the Administrative Agent, J.P. Morgan Securities Inc., Banc of
America Securities LLC, Barclays Capital, Wachovia Capital Markets, LLC
and Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., “Rabobank
Nederland”, New York Branch, as Joint Bookrunners and Joint Lead
Arrangers, Bank of America, N.A. and Barclays Capital, as Co-Syndication
Agents and Wachovia Bank, National Association and Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., “Rabobank Nederland”, New York Branch, as
Co Documentation Agents and certain other lenders party thereto
(previously filed as Exhibit 10.1 to the Company’s Current Report on Form
8-K filed March 10, 2009, Commission File No. 001-14704, and incorporated
herein by reference).
|
|
|
10.2
|
Convertible
note hedge transaction confirmation, dated as of September 9, 2008, by and
between JPMorgan Chase Bank, National Association and the Company
(previously filed as Exhibit 10.1 to the Company's Current Report on Form
8-K filed September 15, 2008, Commission File No. 001-14704, and
incorporated herein by reference).
|
|
|
10.3
|
Warrant
transaction confirmation, dated as of September 9, 2008, by and between
JPMorgan Chase Bank, National Association and the Company (previously
filed as Exhibit 10.2 to the Company's Current Report on Form 8-K filed
September 15, 2008, Commission File No. 001-14704, and incorporated herein
by reference).
|
|
|
10.4
|
Letter
Agreement, dated as of September 9, 2008, by and between JPMorgan Chase
Bank, National Association and the Company (previously filed as Exhibit
10.3 to the Company's Current Report on Form 8-K filed September 15, 2008,
Commission File No. 001-14704, and incorporated herein by
reference).
|
|
|
10.5
|
Convertible
note hedge transaction confirmation, dated as of September 9, 2008, by and
between Merrill Lynch Financial Markets, Inc. and the Company (previously
filed as Exhibit 10.4 to the Company's Current Report on Form 8-K filed
September 15, 2008, Commission File No. 001-14704, and incorporated herein
by reference).
|
|
|
10.6
|
Warrant
transaction confirmation, dated as of September 9, 2008, by and between
Merrill Lynch Financial Markets, Inc. and the Company (previously filed as
Exhibit 10.5 to the Company's Current Report on Form 8-K filed September
15, 2008, Commission File No. 001-14704, and incorporated herein by
reference).
|
|
|
10.7
|
Letter
Agreement, dated as September 9, 2008, by and between Merrill Lynch
Financial Markets, Inc. and the Company (previously filed as Exhibit 10.6
to the Company's Current Report on Form 8-K filed September 15, 2008,
Commission File No. 001-14704, and incorporated herein by
reference).
|
|
|
10.8
|
Agreement,
dated January 16, 2009, between Richard L. Bond and the Company
(previously filed as Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the period ended December 27, 2008, Commission File No.
001-14704, and incorporated herein by reference).
|
|
|
10.9
|
Second
Amended and Restated Employment Agreement, dated as of December 19, 2006,
by and between Richard L. Bond and the Company (previously filed as
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed December
22, 2006, Commission File No. 001-14704, and incorporated herein by
reference).
|
|
|
10.10
|
Restricted
Stock Unit Agreement, dated as of September 28, 2007, between the Company
and Richard L. Bond (previously filed as Exhibit 10.3 to the Company's
Current Report on Form 8-K filed September 28, 2007, Commission File No.
001-14704, and incorporated herein by reference).
|
|
|
10.11
|
Executive
Employment Agreement, dated June 5, 2009, between the Company and Leland
E. Tollett (previously filed as Exhibit 10.1 to the Company's Current
Report on Form 8-K/A filed June 5, 2009, Commission File No. 001-14704,
and incorporated herein by reference).
|
|
|
10.12
|
Senior
Executive Employment Agreement dated November 20, 1998 between the Company
and Leland E. Tollett (previously filed as Exhibit 10.20 to the Company’s
Annual Report on Form 10K for the fiscal year ended October 3, 1998,
Commission File No. 001-14704, and incorporated herein by
reference).
|
10.13
|
Amendment
to Senior Executive Employment Agreement dated February 4, 2005, by and
between the Company and Leland E. Tollett (previously filed as Exhibit
10.2 to the Company's Quarterly Report on Form 10-Q for the period ended
January 1, 2005, Commission File No. 001-14704, and incorporated herein by
reference).
|
|
|
10.14
|
Employment
Agreement between the Company and Craig J. Hart, dated October 5,
2009.
|
|
|
10.15
|
Senior
Advisor Agreement, dated July 30, 2004, by and between Don Tyson and the
Company (previously filed as Exhibit 10.43 to the Company's Annual Report
on Form 10-K for the fiscal year ended October 2, 2004, Commission File
No. 001-14704, and incorporated herein by reference).
|
|
|
10.16
|
Executive
Employment Agreement between the Company and James V. Lochner, dated
October 7, 2005 (previously filed as Exhibit 10.2 to the Company's Current
Report on Form 8-K filed October 12, 2005, Commission File No. 001-14704,
and incorporated herein by reference).
|
|
|
10.17
|
Employment
Agreement between the Company and Donald J. Smith, dated August 10, 2009
(previously filed as Exhibit 10.1 to the Company's Current Report on Form
8-K filed August 14, 2009, Commission File No. 001-14704, and incorporated
herein by reference).
|
|
|
10.18
|
Executive
Employment Agreement between the Company and David L. Van Bebber, dated
May 21, 2008 (previously filed as Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the period ended June 28, 2008, Commission File
No. 001-14704, and incorporated herein by reference).
|
|
|
10.19
|
Executive
Employment Agreement between the Company and Dennis Leatherby, dated June
6, 2008 (previously filed as Exhibit 10.1 to the Company's Current Report
on Form 8-K filed June 11, 2008, Commission File No. 001-14704, and
incorporated herein by reference).
|
|
|
10.20
|
Executive
Employment Agreement between the Company and Richard A. Greubel, Jr, dated
May 3, 2007 (previously filed as Exhibit 10.1 to the Company’s Quarterly
Report on Form 10-Q for the period ended March 31, 2007, Commission File
No. 001-14704, and incorporated herein by reference).
|
|
|
10.21
|
Executive
Employment Agreement between the Company and Jeffrey D. Webster, dated
December 1, 2008 (previously filed as Exhibit 10.1 to the Company’s
Quarterly Report on Form 10-Q for the period ended March 28, 2009,
Commission File No. 001-14704, and incorporated herein by
reference).
|
|
|
10.22
|
Employment
Agreement between the Company and Kenneth J. Kimbro, dated October 5,
2009.
|
|
|
10.23
|
Agreement,
dated as of September 28, 2007, between the Company and John Tyson
(previously filed as Exhibit 10.1 to the Company’s Current Report on Form
8-K filed September 28, 2007, Commission File No. 001-14704, and
incorporated herein by reference).
|
|
|
10.24
|
Indemnity
Agreement, dated as of September 28, 2007, between the Company and John
Tyson (previously filed as Exhibit 10.2 to the Company’s Current Report on
Form 8-K filed September 28, 2007, Commission File No. 001-14704, and
incorporated herein by reference).
|
|
|
10.25
|
Form
of Indemnity Agreement between Tyson Foods, Inc. and its directors and
certain 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).
|
|
|
10.26
|
Form
of IBP's Indemnification Agreement with officers and directors (previously
filed as Exhibit 10.8 to IBP's Registration Statement on Form S-1, dated
August 19, 1987, File No. 1-6085 and incorporated hereby by
reference).
|
|
|
10.27
|
Tyson
Foods, Inc. Annual Incentive Compensation Plan for Senior Executives
adopted February 4, 2005 (previously filed as Exhibit 10.34 to the
Company's Annual Report on Form 10-K for the fiscal year ended October 1,
2005, Commission File No. 001-14704, and incorporated herein by
reference).
|
|
|
10.28
|
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).
|
10.29
|
Amended
and Restated Tyson Foods, Inc. Employee Stock Purchase Plan, effective as
of October 1, 2008 (previously filed as Exhibit 10.41 to the Company's
Annual Report on Form 10-K for the fiscal year ended September 27, 2008,
Commission File No. 001-14704, and incorporated herein by
reference).
|
|
|
10.30
|
First
Amendment to the Tyson Foods, Inc. Employee Stock Purchase
Plans effective December 27, 2009.
|
|
|
10.31
|
Restated
Executive Savings Plan of Tyson Foods, Inc. effective January 1, 2009
(previously filed as Exhibit 10.42 to the Company's Annual Report on Form
10-K for the fiscal year ended September 27, 2008, Commission File No.
001-14704, and incorporated herein by reference).
|
|
|
10.32
|
First
Amendment to Executive Savings Plan of Tyson Foods, Inc. effective January
1, 2009.
|
|
|
10.33
|
Amended
and Restated Tyson Foods, Inc. 2000 Stock Incentive Plan effective
November 19, 2004, First Amendment to the Amended and Restated Tyson
Foods, Inc. 2000 Stock Incentive Plan effective February 2, 2007, and
Second Amendment to the Amended and Restated Tyson Foods, Inc. 2000 Stock
Incentive Plan effective August 13, 2007 (previously filed as Exhibit
10.43 to the Company's Annual Report on Form 10-K for the fiscal year
ended September 27, 2008, Commission File No. 001-14704, and incorporated
herein by reference).
|
|
|
10.34
|
Third
Amendment to the Tyson Foods, Inc. 2000 Stock Incentive
Plan effective November 20, 2009.
|
|
|
10.35
|
IBP
1996 Stock Option Plan (previously filed as Exhibit 10.5.7 to IBP's Annual
Report on Form 10-K for the fiscal year ended December 28, 1996, File No.
1-6085 and incorporated herein by reference).
|
|
|
10.36
|
Amended
and Restated Retirement Income Plan of IBP, inc. effective August 1, 2000,
and Amendment to Freeze the Retirement Income Plan of IBP, inc. effective
December 31, 2002 (previously filed as Exhibit 10.46 to the Company's
Annual Report on Form 10-K for the fiscal year ended September 27, 2008,
Commission File No. 001-14704, and incorporated herein by
reference).
|
|
|
10.37
|
Amended
and Restated Tyson Foods, Inc. Supplemental Executive Retirement and Life
Insurance Premium Plan effective March 1, 2007, First Amendment to the
Amended and Restated Tyson Foods, Inc. Supplemental Executive Retirement
and Life Insurance Premium Plan effective September 24, 2007, and Second
Amendment to the Amended and Restated Tyson Foods, Inc. Supplemental
Executive Retirement and Life Insurance Premium Plan effective January 1,
2008 (previously filed as Exhibit 10.47 to the Company's Annual Report on
Form 10-K for the fiscal year ended September 27, 2008, Commission File
No. 001-14704, and incorporated herein by reference).
|
|
|
10.38
|
Retirement
Savings Plan of Tyson Foods, Inc. effective January 1, 2008 (previously
filed as Exhibit 10.48 to the Company's Annual Report on Form 10-K for the
fiscal year ended September 27, 2008, Commission File No. 001-14704, and
incorporated herein by reference).
|
|
|
10.39
|
First
Amendment to the Retirement Savings Plan of Tyson Foods,
Inc. effective January 1, 2008.
|
|
|
10.40
|
Form
of Restricted Stock Agreement pursuant to which restricted stock awards
were granted under the Tyson Foods, Inc. 2000 Stock Incentive Plan prior
to July 31, 2009 (previously filed as Exhibit 10.48 to the Company's
Annual Report on Form 10-K for the fiscal year ended October 2, 2004,
Commission File No. 001-14704, and incorporated herein by
reference).
|
|
|
10.41
|
Form
of Restricted Stock Agreement pursuant to which restricted stock awards
are granted under the Tyson Foods, Inc. 2000 Stock Incentive Plan
effective July 31, 2009.
|
|
|
10.42
|
Form
of Stock Option Grant Agreement pursuant to which stock option awards were
granted under the Tyson Foods, Inc. 2000 Stock Incentive Plan prior to
July 31, 2009 (previously filed as Exhibit 10.49 to the Company's Annual
Report on Form 10-K for the fiscal year ended October 2, 2004, Commission
File No. 001-14704, and incorporated herein by
reference).
|
|
|
10.43
|
Forms
of Stock Option Grant Agreements pursuant to which stock option awards are
granted under the Tyson Foods, Inc. 2000 Stock Incentive Plan effective
July 31, 2009.
|
|
|
10.44
|
Form
of Performance Stock Award Agreement pursuant to which performance stock
awards are granted under the Tyson Foods, Inc. 2000 Stock Incentive Plan
effective September 29, 2009.
|
12.1
|
Calculation
of Ratio of Earnings to Fixed Charges
|
|
|
14.1
|
Code
of Conduct of the Company (previously filed as Exhibit 14.1 to the
Company's Current Report on Form 8-K filed January 18, 2007, Commission
File No. 001-14704, and incorporated herein by
reference).
|
|
|
16.1
|
Letter
of Ernst & Young LLP dated June 12, 2009 (previously filed as Exhibit
16.1 to the Company's Current Report on Form 8-K filed June 12, 2009,
Commission File No. 001-14704, and incorporated herein by
reference).
|
|
|
21
|
Subsidiaries
of the Company
|
|
|
23
|
Consent
of Ernst & Young LLP
|
|
|
31.1
|
Certification
of Chief Executive Officer pursuant to SEC Rule 13a-14(a)/15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to SEC Rule 13a-14(a)/15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
32.1
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
|
32.2
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
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/
Dennis Leatherby
|
|
November
23, 2009
|
|
|
Dennis
Leatherby
|
|
|
|
|
Executive
Vice President and Chief
|
|
|
|
|
|
Financial
Officer
|
|
|
|
|
|
|
|
|
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/
Lloyd V. Hackley
|
|
Director
|
November
23, 2009
|
Lloyd
V. Hackley
|
|
|
|
|
|
|
|
/s/
Craig J. Hart
|
|
Senior
Vice President, Controller and
|
November
23, 2009
|
Craig
J. Hart
|
|
Chief
Accounting Officer
|
|
|
|
|
|
/s/
Jim Kever
|
|
Director
|
November
23, 2009
|
Jim
Kever
|
|
|
|
|
|
|
|
/s/
Kevin M. McNamara
|
|
Director
|
November
23, 2009
|
Kevin
M. McNamara
|
|
|
|
|
|
|
|
/s/
Dennis Leatherby
|
|
Executive
Vice President and Chief Financial Officer
|
November
23, 2009
|
Dennis
Leatherby
|
|
|
|
|
|
|
|
/s/
Brad T. Sauer
|
|
Director
|
November
23, 2009
|
Brad
T. Sauer
|
|
|
|
|
|
|
|
/s/
Donnie Smith |
|
President
and Chief Executive Officer |
November
23, 2009 |
Donnie
Smith |
|
|
|
|
|
|
|
/s/
Jo Ann R. Smith
|
|
Director
|
November
23, 2009
|
Jo
Ann R. Smith
|
|
|
|
|
|
|
|
/s/
Robert C. Thurber
|
|
Director
|
November
23, 2009
|
Robert
C. Thurber
|
|
|
|
|
|
|
|
/s/
Barbara A. Tyson
|
|
Director
|
November
23, 2009
|
Barbara
A. Tyson
|
|
|
|
|
|
|
|
/s/
Don Tyson
|
|
Director
|
November
23, 2009
|
Don
Tyson
|
|
|
|
|
|
|
|
/s/
John Tyson
|
|
Chairman
of the Board of Directors
|
November
23, 2009
|
John
Tyson
|
|
|
|
|
|
|
|
/s/
Albert C. Zapanta
|
|
Director
|
November
23, 2009
|
Albert
C. Zapanta
|
|
|
|
FINANCIAL
STATEMENT SCHEDULE
TYSON
FOODS, INC.
SCHEDULE
II
VALUATION
AND QUALIFYING ACCOUNTS
Three
Years Ended October 3, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in
millions
|
|
|
|
|
|
|
Additions
|
|
|
|
|
|
|
|
|
|
Balance
at Beginning of Period
|
|
|
Charged
to Costs and Expenses
|
|
|
Charged
to Other Accounts
|
|
|
(Deductions)
|
|
|
Balance
at End of Period
|
|
Allowance
for Doubtful Accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
$ |
12 |
|
|
$ |
22 |
|
|
$ |
- |
|
|
$ |
(1 |
) |
|
$ |
33 |
|
2008
|
|
|
8 |
|
|
|
5 |
|
|
|
- |
|
|
|
(1 |
) |
|
|
12 |
|
2007
|
|
|
8 |
|
|
|
1 |
|
|
|
- |
|
|
|
(1 |
) |
|
|
8 |
|
Inventory
Lower of Cost or Market Allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
$ |
13 |
|
|
$ |
57 |
|
|
$ |
- |
|
|
$ |
(48 |
) |
|
$ |
22 |
|
2008
|
|
|
4 |
|
|
|
29 |
|
|
|
- |
|
|
|
(20 |
) |
|
|
13 |
|
2007
|
|
|
1 |
|
|
|
12 |
|
|
|
- |
|
|
|
(9 |
) |
|
|
4 |
|