UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
SCHEDULE TO
(RULE 14d-100)
Tender Offer Statement Pursuant to Section 14(d)(1) or 13(e)(1) of
the Securities Exchange Act of 1934
(AMENDMENT NO. 17)
IBP, INC.
(Name of Subject Company)
LASSO ACQUISITION CORPORATION
TYSON FOODS, INC.
(Name of Filing Persons-Offeror)
COMMON STOCK, PAR VALUE $0.05 PER SHARE
(Title of Class of Securities)
_______________
449223106
(Cusip Number of Class of Securities)
LES BALEDGE
TYSON FOODS, INC.
2210 West Oaklawn Drive
Springdale, Arkansas 72762
Telephone: (501) 290-4000
(Name, Address and Telephone Number of Person Authorized to Receive
Notices
and Communications on Behalf of Filing Persons)
Copies to:
Mel M. Immergut
Lawrence Lederman
Milbank, Tweed, Hadley & McCloy LLP
One Chase Manhattan Plaza
New York, New York 10005
Telephone: (212) 530-5732
CALCULATION OF FILING FEE
Transaction Amount of
valuation* filing fee
----------------- -----------------
$1,570,612,320 $314,122.47
* Estimated for purposes of calculating the amount of the filing fee only.
The amount assumes the purchase of a total of 52,353,744 shares of the
outstanding common stock, par value $0.05 per share, of IBP, inc., at a
price per Share of $30.00 in cash. Such number of Shares, together with the
574,200 shares owned by Tyson Foods, Inc., represents approximately 50.1%
of the 105,644,598 Shares of IBP, inc. outstanding as of December 28, 2000
(as represented by IBP, inc. in the Agreement and Plan of Merger, dated
January 1, 2001, by and between Tyson Foods, Inc., Lasso Acquisition
Corporation, and IBP, inc.).
[X] Check box if any part of the fee is offset as provided by Rule 0-
11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
Amount Previously Paid: 314,122.47 Filing Party: Tyson Foods, Inc.
(Offeror Parent) and Lasso
Acquisition Corporation Form or
Registration No.: Schedule TO
Date Filed: December 12, 2000,
December 29, 2000 and
January 2, 2001
[ ] Check the box if the filing relates solely to preliminary
communications made before the commencement of a tender offer.
Check the appropriate boxes below to designate any transactions to which
the statement relates:
[ ] third-party tender offer subject to Rule 14d-1.
[ ] issuer tender offer subject to Rule 13e-4.
[ ] going-private transaction subject to Rule 13e-3.
[ ] amendment to Schedule 13D under Rule 13d-2.
Check the following box if the filing is a final amendment reporting the
results of the tender offer. [ ]
AMENDMENT NO. 17 TO TENDER OFFER STATEMENT
This Amendment No. 17 to the Tender Offer Statement on Schedule TO as
the same may have been amended from time to time (as amended hereby, the
"Schedule TO") relates to the offer by Lasso Acquisition Corporation, a
Delaware corporation ("Purchaser") and a wholly owned subsidiary of Tyson
Foods, Inc. ("Tyson") to purchase the number of outstanding shares of
common stock, par value $0.05 per share (the "Shares"), of IBP, inc., a
Delaware corporation ("Company"), which, together with the Shares owned by
Tyson, constitutes 50.1% of the outstanding Shares at $30.00 per Share, net
to the seller in cash, upon the terms and subject to the conditions set
forth in the Supplement No. 1 to the Offer to Purchase, dated January 5,
2001 (as amended, the "Supplement Offer to Purchase"), and in the related
Letter of Transmittal (which, together with any amendments or supplements
thereto, collectively constitute the "Offer"). Attached hereto as Exhibit
(a)(27) is a transcript of the conference call dated January 29, 2001 and
the information contained therein is incorporated herein by reference.
Except as amended below, the information set forth in the Supplement
Offer to Purchase and the related Letter of Transmittal is incorporated
herein by reference with respect to Items 1 through 11 of this Schedule TO.
Item 12. Exhibits.
(a)(1) Offer to Purchase dated December 12, 2000.*
(a)(2) Letter of Transmittal (including Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9).*
(a)(3) Notice of Guaranteed Delivery.*
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.*
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.*
(a)(6) Form of summary advertisement dated December 12, 2000.*
(a)(7) Press Release issued by Tyson dated December 11, 2000.*
(a)(8) Tyson Conference call dated December 12, 2000.*
(a)(9) Press Release issued by Tyson dated December 12, 2000.*
(a)(10) Tyson Presentation delivered December 14, 2000.*
(a)(11) Press Release issued by Tyson dated December 19, 2000.*
(a)(12) Tyson Presentation delivered December 19, 2000.*
(a)(13) Press Release issued by Tyson dated December 28, 2000.*
(a)(14) Press Release issued by Tyson dated January 1, 2001.*
(a)(15) Tyson Conference call dated January 2, 2001.*
(a)(16) Supplement to the Offer to Purchase dated January 5, 2001.*
(a)(17) Letter of Transmittal to the Supplement (including Guidelines for
Certification of Taxpayer Identification Number on Substitute
Form W-9).*
(a)(18) Notice of Guaranteed Delivery to the Supplement.*
(a)(19) Tyson Letter to IBP stockholders dated January 5, 2001.*
(a)(20) Revised Tyson Letter to IBP stockholders dated January 5, 2001.*
(a)(21) Tyson Shareholder Meeting dated January 12, 2001.*
(a)(22) Press Release issued by Tyson dated January 12, 2001.*
(a)(23) Credit Agreement by and among Tyson Foods, Inc. and certain
lenders party thereto, dated as of January 12, 2001. *
(a)(24) Press Release issued by Tyson dated January 17, 2001. *
(a)(25) Press Release issued by Tyson dated January 25, 2001.*
(a)(26) Press Release issued by Tyson dated January 29, 2001.*
(a)(27) Tyson Conference call dated January 29, 2001.
(d)(1) Confidentiality Agreement between Parent and the Company dated
December 4, 2000.*
(d)(2) Proposed form of Merger Agreement to be entered into by and among
Tyson, Purchaser and the Company.*
(d)(3) Revised Merger Agreement, executed by Tyson.*
(d)(4) Agreement and Plan of Merger dated as of January 1, 2001 among
IBP, inc., Tyson Foods, Inc. and Lasso Acquisition Corporation.*
(d)(5) Voting Agreement by and between Tyson Limited Partnership and
IBP, inc. dated as of January 1, 2001.*
(d)(6) Confidentiality Agreement between the Company and Parent dated
December 18, 2000.*
* Previously filed.
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and
correct.
TYSON FOODS, INC.
/s/ LES BALEDGE
------------------------------
(Signature)
Les Baledge, Executive Vice
President and General Counsel
------------------------------
(Name and Title)
January 29, 2001
------------------------------
(Date)
LASSO ACQUISITION CORPORATION
/s/ LES BALEDGE
------------------------------
(Signature)
Les Baledge, Executive Vice President
----------------------------------------
(Name and Title)
January 29, 2001
----------------------------------------
(Date)
EXHIBIT INDEX
Exhibit No.
-----------
Item 12. Exhibits.
(a)(1) Offer to Purchase dated December 12, 2000.*
(a)(2) Letter of Transmittal (including Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9).*
(a)(3) Notice of Guaranteed Delivery.*
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.*
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.*
(a)(6) Form of summary advertisement dated December 12, 2000.*
(a)(7) Press Release issued by Tyson dated December 11, 2000.*
(a)(8) Tyson Conference call dated December 12, 2000.*
(a)(9) Press Release issued by Tyson dated December 12, 2000.*
(a)(10) Tyson Presentation delivered December 14, 2000.*
(a)(11) Press Release issued by Tyson dated December 19, 2000.*
(a)(12) Tyson Presentation delivered December 19, 2000.*
(a)(13) Press Release issued by Tyson dated December 28, 2000.*
(a)(14) Press Release issued by Tyson dated January 1, 2001.*
(a)(15) Tyson Conference call dated January 2, 2001.*
(a)(16) Supplement to the Offer to Purchase dated January 5, 2001.*
(a)(17) Letter of Transmittal to the Supplement (including Guidelines for
Certification of Taxpayer Identification Number on Substitute
Form W-9).*
(a)(18) Notice of Guaranteed Delivery to the Supplement.*
(a)(19) Tyson Letter to IBP stockholders dated January 5, 2001.*
(a)(20) Revised Tyson Letter to IBP stockholders dated January 5, 2001.*
(a)(21) Tyson Shareholder Meeting dated January 12, 2001.*
(a)(22) Press Release issued by Tyson dated January 12, 2001.*
(a)(23) Credit Agreement by and among Tyson Foods, Inc. and certain
lenders party thereto, dated as of January 12, 2001. *
(a)(24) Press Release issued by Tyson dated January 17, 2001. *
(a)(25) Press Release issued by Tyson dated January 25, 2001.*
(a)(26) Press Release issued by Tyson dated January 29, 2001.*
(a)(27) Tyson Conference call dated January 29, 2001.
(d)(1) Confidentiality Agreement between Parent and the Company dated
December 4, 2000.*
(d)(2) Proposed form of Merger Agreement to be entered into by and among
Tyson, Purchaser and the Company.*
(d)(3) Revised Merger Agreement, executed by Tyson.*
(d)(4) Agreement and Plan of Merger dated as of January 1, 2001 among
IBP, inc., Tyson Foods, Inc. and Lasso Acquisition Corporation.*
(d)(5) Voting Agreement by and between Tyson Limited Partnership and
IBP, inc. dated as of January 1, 2001.*
(d)(6) Confidentiality Agreement between the Company and Parent dated
December 18, 2000.*
* Previously filed.
Exhibit (a)(27)
Media Contact: Ed Nicholson
(501) 290-4591
Investor Contact: Louis Gottsponer
(501) 290-4826
TYSON FOODS
January 29, 2001
10:00 a.m. CST
Moderator Ladies and gentlemen, thank you for standing by. Welcome to
the Tyson Foods 1st Quarter Report conference call. At this
time, all participants are in a listen-only mode. Later, we
will be having a question and answer session. Instructions
will be given at that time. As a reminder, this conference
is being recorded. I would now like to turn the call over
to Mr. Louis Gottsponer. Please go ahead, sir.
L. Gottsponer Thank you. Good morning and thank you for joining us today
for the Tyson Foods 1st Quarter conference call. With me
today are John Tyson, Chairman, President and CEO; as well
as Greg Lee, COO and Steve Hankins, CFO.
Before we get too far along, let me just remind you that
some of the things we talk about today may include forward-
looking statements. That means those statements are going
to be based on our view of the world as we know it today and
that also means that things could change. So I would
encourage you to look at today's press release for a
discussion of the risks that can affect our business.
Before we get into the financials, I want to make just a few
comments regarding the IBP accounting issues and our pending
transaction. As you know, there were several press releases
last week and there was one this morning as well stating
that our waiting period under the Hart-Scott-Rodino Anti
Trust Law had expired over the weekend without action by the
federal government. Let me just say that we continue to
join IBP in their desire for a prompt resolution of these
accounting issues and the completion of the Tyson/IBP
combination.
The December 29th SEC comment letter to IBP touches on
several important issues including cooling treatment for
their 2000 CBFA acquisition and questions surrounding the $9
million charge taken in IBP's third quarter related to their
DFG subsidiary. As noted in IBP's press release of last
Friday, they now expect to take an additional pretax charge
of $47 million related to that subsidiary.
We learned that the SEC comment letter existed on January
10th, which was well after the signing of our acquisition
agreement. IBP's management has indicated they did not know
of the letter until that time as well. IBP communicated
with us on several occasions concerning the status of their
DFG subsidiary.
While on December 29th we were informed of the likelihood of
an additional one-time charge related to DFG, only last week
did we learn that the amount of additional charge had now
reached $47 million. Also, during IBP's process of
developing a response to the SEC's comment letter, we were
made aware of the issues relating to potential restatement
of prior financial statements and the possibility of
additional impairment charges for goodwill and other long-
live assets. Obviously, we will be patient until these
accounting issues are resolved and, like IBP, are unsure if
historical IBP financial statements will need to be restated
or if further impairment for goodwill and other long-lived
assets will be required. Once these matters are fully
resolved, we will assess their impact, if any, to IBP's
financial statements in business.
Having said all of that, we will not be taking questions
today on any of these issues related to the IBP acquisition.
The purpose of this call is to talk about Tyson's first
quarter earnings.
So now, let's talk about our income statement for the
quarter. Let's start with volume. As we mentioned in the
press release, total volume was down 4.9% versus last year.
That decline is primarily due to our international segment,
which have some sales that normally happen in the first
quarter but get pushed into the second quarter. In
addition, there were some fast food promotions last year
that were very successful and, therefore, give us a tough
year-over-year comparison. The good news, from a volume
perspective, is that pounds of our core products were up
over 2%, which means the declines in volume came primarily
in the less desirable commodity products.
If you turn your attention to sales dollars, you will notice
they were only down 2%, which might lead you to believe we
had a big improvement in pricing. That certainly was not
the case. The price for our boneless skinless chicken
breasts, in particular, continues to be effected by the over
supply of chicken on the market. As a matter of fact,
average market prices for that product were down over 12%
from the previous year. The fact that sales dollars are
down less than volume is really due to the shipped and
product mix that resulted from selling fewer pounds of leg
quarters internationally and from our continuing efforts to
not sell commodity products to our competitors to be further
processed.
The gross margin decline for the quarter and the year are
primarily due to the effect of the poultry markets we just
talked about; however, we did experience higher costs for
soybean meal, which more than offset price declines for
corn. In addition, we had higher costs associated with snow
losses in December, but we'll talk more about that in a few
minutes.
Selling expenses were down versus last year as we continue
to focus on managing our spending in this area. And G&A
expenses are up versus last year, but flat versus the
previous quarter. That increase versus last year is due
primarily to reserves for legal expenses related to ongoing
employee practice matters. We've discussed those in
previous quarterly reports and I don't expect the updates of
those matters in the next 10-Q to be materially different
from what we've said in the past.
This brings us finally to earnings per share, which we
reported at $0.12. Keep in mind that the snow losses I
talked about earlier cost us approximately one cent per
share during the quarter. So excluding those snow losses,
we would have made $0.13 for the quarter.
I think that takes care of the income statement, so with
that I'll turn it over to our CFO Steve Hankins.
S. Hankins Thank you, Louis. Good morning. Some basic financial
information that we cover, cash flow from operations for the
quarter was $123 million, down from $205 million a year ago.
Of course earnings were down and also a growth in inventory
related to the inventory sales situation that Louis referred
to.
Our total debt at $1.465 billion, down from the previous
year. Average debt was down from the previous year by $283
million and our average debt was down from the fourth
quarter of 2000 by $66 million. That brings our debt to
capital ratio to 40.2%.
Our average borrowing costs were up versus last year at
7.18% versus 6.72% the previous year. Of course short-term
rates are higher. We were down, however, from the fourth
quarter and that was due to the payments late in the fourth
quarter and early in the first quarter of some expensive
long-term debt.
Our capital expenditures for the quarter were $47 million,
basically flat to last year. Our average tax rate, which we
mentioned this time in our press release, was 34.8%.
As we announced last time, in accordance with Regulation FD,
we've added a business outlook to our conference call. In
this outlook we provide guidance related to questions that
have typically been asked for certain forward-looking
financial information and these statements are based on our
current expectations. They are forward-looking and actual
results may differ materially. These statements do not
include the potential impact of any mergers, acquisitions or
other business combinations, or other extraordinary events
that may occur in the future, and specifically these
statements today relate to existing Tyson business and do
not include any consideration of the impending combination
with IBP. And as a reminder, towards the end of each
physical quarter we will continue to have a quiet period and
we will not comment concerning our outlook on Tyson's
financial results or expectations. The quiet period will
extend from the last day of the quarter until the day when
Tyson's next quarterly earnings release is published. And
for the second quarter of fiscal 2001, the quiet period will
begin on March 31st.
Now prior to the start of the quiet period, the public can
continue to rely on the outlook as being Tyson's current
expectations unless we issue a press release that states
otherwise. We will continue our current practice of meeting
privately during the quarter with investors, the media,
analysts and others, and at these meetings Tyson's may
reiterate our outlook as presented in the conference call or
as amended by later press releases.
In our outlook today we will focus specifically on the
second quarter of fiscal 2001, unless indicated otherwise.
We will not be presenting an outlook for the third or fourth
quarters of fiscal 2001, and for the following reasons. The
visibility into the grain markets beyond planting season and
into those markets that are strongly influenced by the
weather in the spring and summer is very difficult. Also,
it continues to be unclear when the industry over supply
situation and the related market effect will be resolved.
So on to our specific outlook. The Company expects both
revenues and volumes to be essentially flat for the second
quarter of 2001 as compared to the second quarter of 2000.
We expect gross margin for the second quarter to be in the
range of 13-14%. SG&A expenses for the fiscal year 2001
continue to be expected to be approximately 10% each
quarter.
We expect interest, foreign exchange and other charges for
the second quarter to be in the range of $25-26 million.
Our tax rate for fiscal 2001 is expected to be approximately
36%.
Capital spending for the year fiscal 2001 is expected to be
in the range of $230-250 million. Depreciation is expected
to be approximately $260 million for the year. Amortization
of goodwill is expected to be approximately $35 million for
the year.
Our earnings per share for the second quarter of fiscal 2001
is expected to be in the range of $0.06 to $0.10 per share.
You will note, this is a reduction from the outlook
previously given in the November 13, 2000 conference call.
So the new outlook is $0.06 to $0.10 per share.
And as Louis noted, the weather affected the first quarter
approximately one cent per share. We expect the carry over
affect into the second quarter of the weather to be between
one and two cents a share. Additionally, our current
outlook for leg quarter pricing and breast markets is
slightly lower than that that was factored into our previous
outlook.
Our outlook for grain markets is also slightly more
pessimistic than that in the previous outlook. So again,
our outlook for the second quarter specifically at fiscal
2001 is $0.06 to $0.10 per share.
With that, I will pass it over to Greg Lee, our Chief
Operating Officer.
G. Lee Good morning. Top line sales for the quarter continued to
be influenced by our cutback in bird production. Sales of
core finished goods grew just over 2% in total tonnage.
This was led by our Consumers Product group with a 5+%
increase in tonnage and our Food Service group with a 2.75%
increase in tonnage of core finished goods for the quarter.
International sales experience a 16% decline in tonnage
sales for the quarter versus the same quarter last year.
Reduced volume sales of low unit value leg quarters as a
percent of our total sales mix and higher sales prices for
the leg quarters that were sold combined to contribute to
averaging up our sales prices for all chicken during the
period.
The reduced sales of commodity chicken domestically
resulting from both our cut backs and our shift of
commodities to core value added finished goods also
contributed to our coming in with a 2% decline in dollar
sales against a 4.9% reduction in overall volume.
Our international sales were negatively impacted by the
timing of sales between the first quarter and our second
quarter as well as by the severe weather that slowed
movement of product to port, the loading and shipment of
product at the port and the production of product at Tyson
locations. It is fully expected that increased
international sales volume in the second quarter will bring
our total sales for the first six months back in line and
bring our frozen inventory back to targeted levels.
It is important to note that leg quarter values have been on
the decline through the last two months with current prices
approximately $0.08 per pound lower than the average for
quarter one. Breast meat commodity market prices continue
to be pressured by an over supply of chicken throughout the
quarter and, as Louis indicated, tracked some 12% lower than
the same quarter last year. This situation not only
continues to adversely affect the average sales prices and
margins of many of our core value added products, but also
serves to obscure much of the benefits of our focused shift
to value added products targeted to reduce the amount of raw
material we've been selling to non-integrated further
processors. Our volumes in these products continue to grow
and, I'm happy to report, that the selling prices are
finally beginning to move up, particularly in the last two
weeks. We hope that's a sign for the future.
Industry egg sets for the last seven weeks have averaged
down 1.5% from the same time period last year. Ice and
snowstorms that occurred in the south central US in late
December and again in early January negatively influenced
this average. We expect the chicken numbers to be lower for
an eight week period by about 1.5% and then likely to return
to approximately flat with last year's production through
June. While Tyson remains cutback in production, we are
anxious to move back towards full production as market
conditions allow.
While aggressive to do better, we are encouraged with volume
growth and sales mix improvement across our divisions. Our
Consumer Product groups show growth in Tyson fresh
prepackaged chicken, in individually frozen chicken parts
and in our industry-leading frozen value added boxed and
bagged product lines. This growth, coupled with the growth
in food service sales of frozen value added and refrigerated
value added products, have allowed us to begin installation
of two new, fully cooked oven systems with two more on the
way, six new automated cut up systems for expanded fresh
volume and new packaging equipment for fresh, prepackaged
chicken and the start of an additional deboning location for
our food service group. Energy costs, fuel and snow losses,
coupled with the tough markets, related to the over supply
of chicken, are effecting near-term results, but we remain
confident that our business is rounding into shape to
capitalize on improving market conditions.
In closing, let me comment on our strategic initiatives.
Our purchasing programs have identified and put into place
purchasing programs that will save us some $40 million on an
annualized basis. We plan to see that move to near $100
million annualized by the end of calendar 2001. Our center
of operational excellence continues to work across all of
our operations to identify and implement best practices, and
through its research capabilities improve our costs, our
productivity and our quality. Year to date, we have
implemented programs in 15 plants with potential savings of
$10 million annually. In addition, we have trained 125
management team members in best practices management
techniques in several key areas of operation, such as
marination, oven control management, and sanitation.
Thank you. John?
J. Tyson Greg, Steve and Louis, I thank you. A lot of the
information that our friends out there need to hear has been
shared with from these guys. I think I'll summarize it very
quickly and then we'll get on to Q&A.
Our folks have been making tough decisions in a tough
environment that has lasted for an extended length of time.
We all have been around and watched the poultry industry for
a period of time and the toughness in this industry, it's
the longest I can remember since 1982. But I think the
thing that I notice about our folks is that we are managing
the things that we can control, we're making progress and
changing our product mix, we're making progress in reducing
our cost, and that's what you asked us to do. Then we have
to deal the best we can with things that are out of our
control, such as snowstorms. The snowstorm will probably
have as big an impact on our business as anything this year
on a go forward basis.
Our game plan is making progress, and sometimes when you put
a game plan in place, there's a tendency to question whether
your game plan's working. Our game plan's working, it's
making progress and we still stay with it as a move on into
springtime.
I want to thank all our friends out there today for
listening and we'll turn it over now for Q&A.
Moderator Thank you. Our first question comes from George Dahlman with
US Bancorp/Piper Jaffrey.
G. Dahlman Good morning. You indicated you have a outlook for higher
feed costs at this point as you move into the second
quarter. We're seeing lower feed costs at the moment
because of the concerns over the mad cow disease. How is
your thinking coming about with this one?
G. Lee George, let me comment about that briefly. Yes, you're
exactly right, we are seeing in the near-term we've seen
some improvement in pricing; however, we still believe that
by the time you aggregate all purchases and opportunity for
the entire quarter that we'll still be impacted. But we are
encouraged by the improvement in near-term pricing.
Moderator Next question is from Jeffrey Kanter from Prudential
Securities.
J. Kanter Just a clarification. You said that overall volumes were
down 4.9%, but when you just look at the core products it
was up 2%, with consumer products volume up about 5% and
food service up around 2.75%. Do I have those numbers
right?
G. Lee That is correct, Jeff.
J. Kanter Okay. I realize that you don't want to make any comments
with respect to IBP, but clearly the investment community is
making all sorts of comments and we read comments that have
been said between yourselves and IBP. Clearly, sitting here
in New York, it's clearly evident that you wanted IBP badly
enough to be willing to give management $70 million if you
didn't get SHR clearance, and we know about all the merits
of the deal, but what we're trying to figure out is, has
that changed? You talk about making tough decisions and
managing things you can control. Clearly, you can't control
mad cow disease. Can you mention anything about this,
because the market's assuming that you're having second
thoughts about doing this thing and paying $70 million is a
lot greater than dealing with $49 million. We're just
trying to figure it all out.
L. Gottsponer Like I said at the beginning, we're really hear today to
talk about Tyson and the existing business and our outlook
for the chicken business, so we won't be taking questions on
IBP today. But if you've got some additional questions
about our business, we'd be happy to take them.
J. Kanter Given your guidance of third quarter being down, maybe we'll
have to wait for CAGNY, but will full year estimates
potentially be flat? I mean, can you give us any indication
there?
S. Hankins This is Steve. Second quarter is what we specifically gave
you for.
J. Kanter Yes.
S. Hankins .we're not going to have any comment on the third and fourth
quarter at this time.
J. Kanter Okay, we'll just wait. Thank you.
Moderator Our next question is from Christine McCracken from Midwest
Research.
C. McCracken Good morning. So it looks like chicken markets are starting
to see some improvement here.
J. Tyson We hope so.
C. McCracken Wondering if you could comment, your earlier statement you
had quoted or said that you essentially are starting to ramp
up production again despite the fact that we haven't seen a
noticeable improvement in pricing yet. I'm wondering, is
this to gain back to the market share that it appears that
you lost last year? Why would you go ahead and start
ramping up production without seeing a noticeable
improvement in pricing?
G. Lee Christine, I didn't say we were ramping up production of
total chicken, what I said was that we were ramping up
production of the value added side and continuing to put
pressure internally even to move our products up the value
chain. But we're not interested in moving up total
production of head of chicken until we see some strong
signals from the marketplace that there's a need for more
product.
C. McCracken So you're going to continue to keep your cut backs in place,
expected down 3% for the year or so?
G. Lee We're going to be watching it very closely to see how market
conditions develop.
J. Tyson I think one of the things if you look inside our capital
expenditures where we're spending our money, and we're
spending our money on adding new ovens into our production
mix, we're adding some new capacity for some new products,
and back to what Greg's point is, our time and effort is on
moving up the value chain those commodity products that we
inherited from some past acquisitions back in '95, '97 and
'98. I think you all have seen us step in and eliminate the
number seven poultry company. We've taken some production
out of the commodity base and that's why I'll come back to
our statement - our game plan is making progress and we're
going to stay with it.
C. McCracken What about international, obviously, you've started to see a
seasonal weakness there that's pretty much expected? I'm
wondering, is this something that's more significant? Is it
just the drop in leg quarter prices that you've seen or is
this normal, seasonal weakness?
G. Lee I think we're confident that our markets in the first
quarter or the total volume that we sold was in fact
impacted by some one-time circumstances, some timing and
sales and then that was aggravated by the weather
conditions. But we have every confidence that if you take
the combined total tonnage that we're going to sell over the
first six months of our fiscal year that it will return to
normalcy. Yes, there has been a decline in the leg quarter
markets during this timeframe, the average price for first
quarter for international movement versus what we're
experiencing now, there's a pretty significant change. As a
matter of fact, I mentioned an $0.08 per pound decline. But
as far as volume, we continue to see our opportunities be
good. We've lost some value in price.
C. McCracken So you're not seeing really any ramp up in competitive
action from Brazil? I've been reading a lot lately that
they have stepped up their exports. Are you seeing any
impact from the BSE crisis and maybe expanding the demand
for chicken in those markets?
G. Lee I think that if there was an impact of BSE at all, it's
probably an overall greater demand for chicken, but there's
no question that Brazil is an aggressive competitor, but we
feel like we can certainly hold our own.
C. McCracken One final question. We've seen a huge spike now lately in
chicken wing prices. Is this indicative of an improvement in
food service? Is that anything that might have some
beneficial impact, say year-over-year?
G. Lee The answer there is that there is some fast food activity in
wings that's going on and then the wing season continues to
stretch where there's the Super Bowl, we're now moving into
March Madness we continue to see more utilization of wings
for a longer time period, during the season more pressure on
wings. You're right, the market for wings has moved up and
it is primarily driven by food service, but not exclusively
because the demand for value added wing products in consumer
products is good as well.
J. Tyson Christine, I think the other thing is you've seen some fast
food promotions start at the first of the calendar year this
year that didn't exist in the last 12 months. You had one
chain that ran a promotion that's just wrapping up and
you've got another chain that's starting another promotion
right now, the advertising's breaking. That's something
that the poultry industry has missed in the last 12 months
are aggressive promotions, and so we look forward to that
because we can handle it.
Moderator Our next question is from Leonard Teitelbaum with Merrill
Lynch.
L. Teitelbaum Good morning. I just want to ask a couple of questions
here. As I get it, what we're seeing here is a mix change,
moving product into the value added stream and away from the
commodities that's causing us some volume decline but not
necessarily, so I guess what I'm trying to say is that that
have, I know we're going to have somewhat of a hit to our
margins because our fixed costs are going to be spread over
lower tonnage, but I guess I was a little surprised to see
the margins or the income come down like it has. That's the
first thing.
And Steve, what's in the "other" category that changed for
over $20 million this quarter?
S. Hankins In "other" we have our prepared foods group, our specialty
foods group and we have .. All three of those businesses
were up during the quarter. Also, within that "other"
category we deal with corporate adjustments that apply to
segments in general, that apply to those levels of the
income statements, and we saw a change in those year-over-
year that was favorable. So it's all those dynamics working
together.
L. Teitelbaum I guess I was just surprised to see how big the number was.
S. Hankins When you look at the number in comparison to the last few
quarters, instead of year-over-year, you'll see the number
has been fairly consistent.
L. Teitelbaum Then I'll go back and check that.
G. Lee Lenny, just a real quick comment on the first part of your
question, if I understood it correct, is you were just
trying to understand the relationship of moving towards more
value added and the fact that we weren't seeing a dramatic
improvement in margin associated with that, is that true?
L. Teitelbaum Correct.
G. Lee Well, we're seeing the same thing and I guess the bottom
line is is it's because it's very competitive to move that
volume up and we're aggressive to do it. We're not
experiencing the top line price that we'd like to. That is,
I think, largely a result of the still dramatically reduced
market prices. The declines that we've experienced in leg
quarters, the decline that we've experienced in the breast
prices and just the overall supply of meat is making it
difficult to get full value out of it. We will get it and it
is improving.
L. Teitelbaum If I look at this, clearly we paid a lot for the Tyson name.
I've mentioned this a couple of times before, it just seems
that companies with certainly less of a quality image then
we have seem to be more formidable competitors as we begin
to move up this value chain. I can understand it when we
had the commodity stuff locked in there and there's some
stuff that we got with the Hudson Foods deal, but I gather,
which I think is probably bigger then anybody would like to
admit to, but my concern only is that are we getting full
value for the Tyson name? And if not, why not? I mean,
who's going to go out to beat our time on this?
G. Lee Let's say this, the premium's for the value added products
are improving. We don't have the job done as far as moving
our volume to the extent that we need to. And in the
categories where we're in a commanding branded position, we
do enjoy a premium in those markets, but we still suffer
from the cost implications that we discussed earlier as far
as realizing full value for it. But the program is sound
and as market conditions improve, we're going to be in a
very, very good position to take advantage of it.
L. Teitelbaum I know Steve did not want to talk about the second half, but
let me just ask this. From industry conditions that you
see, Christine talked about it, you talked about it here, we
did $0.53 last year in the second half, if my numbers are
right. Are the industry conditions improved to the point
that, at least from an industry perspective, they're doing
significantly better than that? Again, I want to talk about
from an industry perspective, is that in the cards or not
yet?
G. Lee In the cards is a pretty broad statement. So yes, I'd say
it's probably "in the cards."
S. Hankins That is pretty broad, Lenny, but we're going to stick with
not commenting on the third and fourth quarter at this
point.
L. Teitelbaum I can appreciate you not wanting to talk about the IBP
situation for I'm sure real and obvious reasons, but in all
fairness, this was probably a watershed event for the
company and why wouldn't we come away with the feeling that,
John, while we'd like it, we don't want it at any price and
we'll take it, but there's got to be some tinkering here.
Why wouldn't that be a logical conclusion?
L. Gottsponer Lenny, like you said, we're not prepared to take questions
at this time on IBP, but if you've got some more on Tyson,
we're happy to entertain those.
L. Teitelbaum I thought I'd give it a shot, Louis. Somebody else can step
up to the plate here.
Moderator We have a follow up from Christine McCracken.
C. McCracken Just a quick question on your pork business. I realize it's
a relatively small piece of the pie for Tyson, but thought
it's worth mentioning given I guess sequential declines in
that business. It's looking now at something like break-
even margins, I think, in that piece of the business and I
realize there's a few things that you've been doing to kind
of offset potential impact from that piece of the business.
Can you discuss what you're doing differently now versus
historically in trying to reduce the losses in that
business?
J. Tyson There's two components on that. One is we have our feeder
pig program, which is not as subject to the market as much.
And then our contract with Cargill is basically a production-
based performance contract, which means we don't get all the
highs, but at the same time we don't get all the lows on the
market. And as long as the unit has good production
numbers, we're going to be able to hold our money together
there in the live swine deal.
C. McCracken Is there anything that you had to do to satisfy DOJ concerns
regarding that business? Is there any change in that?
J. Tyson I think that question can be answered by the fact that we
didn't get a second request and we cleared Hart-Scott over
the weekend.
C. McCracken Thank you.
Moderator We have a question from John McMillin with Prudential
Securities.
J. McMillin Just in terms of the company's focus long-term on chicken, I
guess before the IBP deal that you won't talk about, for
understandable reasons, there was kind of a hope to expand
your chicken business more globally. Is that kind of out
the window now?
J. Tyson No, that's not. As we stated when were out on our road show
is that one of the key decisions we had to make was whether
this opportunity would impact our ability to grow and expand
our chicken industry. That question still exists and we're
out there looking aggressively now. Our poultry industry is
in some tough times here in the United States. I can tell
you that I had been getting a few calls from folks about,
hey, I'm tired. And we've had to tell them that based on
their location and the strategic fit for our company that
those particular operations don't match well for us. We are
still spending $10 million to get into fully cooked products
down in Mexico, we're looking at some potential acquisitions
in Mexico right now as we speak. We still spend time
developing our Brazil opportunity. Our Panama deal comes up
on stream in March. We've got some knowledge in China and
we're getting ready to take the one line that we've been
working on there and get it into full production while we
start to look for a second location for doing value added
product in China.
Moderator Our next question is from David Nelson from Credit Suisse
First Boston.
D. Nelson On the chicken markets, wouldn't it be better if they just
stayed bad for a while and got out some of the more
irrational players? I'm sitting here thinking that I'd
rather see things bad for a while then get better.
J. Tyson Well, the question is, how do you want to take your
medicine? Do you want to take it quick and in large doses
or do you want to take small doses over a period of time,
and it's an interesting dynamic within our industry. I
think some folks got some false hope when commodity prices
spiked there in September and October, when Tyson Foods was
making its change in its market mix we saw those changes
happen and then the commodity markets adjusted again. Our
game plan's working and as we've stated, our core mix is up,
our consumer products is up, our food service core mix is
up, and I think some folks got some artificial hope there in
September and October that's not come to pass. It will be
interesting to see what happens on a go forward basis.
The industry with this snowstorm has been impacted to a
degree with some production efficiencies. You get that much
weather, not only in Arkansas but it went to Mississippi and
on into Alabama, that will put some cost pressures on our
competitors and from there we'll just see what decisions
those individuals make. But from a Tyson Foods perspective,
it's all about us moving up the value chain and moving our
commodity product over that line and driving some money home
to the bottom line. And as stated earlier, our game plan's
making progress. I wish it would come quicker, too, but
we'll stay with it and it will be okay.
G. Lee I think one thing to think about, though, is we're sitting
here talking about potentially seeing some improvement in
the markets, but we do need to kind of keep this in
perspective. We've seen the breast meat, bulk breast meat
quote move off a low of around $1.15 with some discounting
going on behind that to $1.35. But by the same token, leg
quarters have gone down $0.08 a pound. By the time you look
at that on a whole bird return basis, you've lost ground.
So it's still a difficult circumstance.
D. Nelson I guess I'd like to see you keep the pressure on and wipe
some of these irrational players out for good.
G. Lee Well I can appreciate your position.
D. Nelson Good luck.
Moderator Due to time constraints, I will turn the call back over to
the presenters for any closing comments.
J. Tyson I'd just like to say thank you for everybody joining us
today. We will keep you informed about our poultry business
and we look forward to keeping you informed about all the
other issues on the table. So everybody, have a good week.
Moderator Ladies and gentlemen, this conference will be available for
replay starting today, January 29th, at 2:00 p.m. Central
Time and it will last until February 28th at midnight. You
may access the AT&T Executive Play Back Service at any time
by dialing 1-800-475-6701. If you're calling
internationally, please dial 320-365-3844. The access code
is 565006.
That does conclude your conference for today. We do thank
you for your participation and you may now disconnect.
About Tyson Foods, Inc.
Tyson Foods, Inc., headquartered in Springdale, Ark., is the world's
largest fully integrated producer, processor and marketer of chicken and
chicken-based convenience foods, with 68,000 team members and 7,400
contract growers in 100 communities. Tyson has operations in 18 states and
15 countries and exports to 73 countries worldwide. Tyson is the recognized
market leader in almost every retail and foodservice market it serves.
Through its Cobb-Vantress subsidiary, Tyson is also a leading chicken
breeding stock supplier. In addition, Tyson is the nation's second largest
maker of corn and flour tortillas under the Mexican Original(R) brand, as
well as a leading provider of live swine.
About IBP, inc.
Headquartered in Dakota Dunes, South Dakota, IBP has more than 60
production sites in North America, joint venture operations in China,
Ireland and Russia and sales offices throughout the world. The company,
which generated sales of $14.1 billion in 1999, employs 49,000 people. IBP
has four business segments: the IBP Fresh Meats Company, Foodbrands
America, Inc., the Consumer Branded Products Group and the IBP
International Sales Company.
Forward Looking Statements.
---------------------------
Certain statements contained in this communication are "forward-looking
statements", such as statements relating to future events and the proposed
Tyson acquisition of IBP. These forward-looking statements are subject to
risks, uncertainties and other factors which could cause actual results to
differ materially from historical experience or from future results
expressed or implied by such forward-looking statements. Among the factors
that may cause actual results to differ materially from those expressed in,
or implied by, the statements are the following: (i) the risk that Tyson
and IBP will not successfully integrate their combined operations; (ii) the
risk that Tyson and IBP will not realize estimated synergies; (iii) unknown
costs relating to the proposed transaction; (iv) risks associated with the
availability and costs of financing, including cost increases due to rising
interest rates; (v) fluctuations in the cost and availability of raw
materials, such as feed grain costs; (vi) changes in the availability and
relative costs of labor and contract growers; (vii) market conditions for
finished products, including the supply and pricing of alternative proteins;
(viii) effectiveness of advertising and marketing programs; (ix) changes in
regulations and laws, including changes in accounting standards,
environmental laws, and occupational, health and safety laws; (x) access to
foreign markets together with foreign economic conditions, including currency
fluctuations; (xi) the effect of, or changes in, general economic conditions;
and (xii) adverse results from on-going litigation. Tyson undertakes no
obligation to publicly update any forward-looking statements, whether as a
result of new information, future events or otherwise.
IMPORTANT INFORMATION
---------------------
LASSO ACQUISITION CORPORATION ("LASSO"), A WHOLLY OWNED SUBSIDIARY OF TYSON
FOODS, INC. ("TYSON") HAS COMMENCED AN OFFER FOR UP TO 50.1% OF THE
OUTSTANDING SHARES OF COMMON STOCK, OF IBP, INC. ("IBP") AT $30.00 NET PER
SHARE TO SELLER IN CASH. THE OFFER CURRENTLY IS SCHEDULED TO EXPIRE AT
12:00 MIDNIGHT, EASTERN STANDARD TIME, ON WEDNESDAY, FEBRUARY 7, 2001,
UNLESS EXTENDED BY LASSO IN ITS DISCRETION. TYSON'S OFFER IS BEING MADE
ONLY BY WAY OF AN OFFER TO PURCHASE AND RELATED LETTER OF TRANSMITTAL AND
ANY AMENDMENTS OR SUPPLEMENTS THERETO AND IS BEING MADE TO ALL HOLDERS OF
IBP'S SHARES. MORE DETAILED INFORMATION PERTAINING TO TYSON'S OFFER AND
THE PROPOSED EXCHANGE OFFER AND MERGER WILL BE SET FORTH IN APPROPRIATE
FILINGS TO BE MADE WITH THE SEC, IF AND WHEN MADE. SHAREHOLDERS ARE URGED
TO READ ANY RELEVANT DOCUMENTS THAT MAY BE FILED WITH THE SEC BECAUSE THEY
WILL CONTAIN IMPORTANT INFORMATION. SHAREHOLDERS WILL BE ABLE TO OBTAIN A
FREE COPY OF ANY FILINGS CONTAINING INFORMATION ABOUT TYSON, LASSO AND IBP,
WITHOUT CHARGE, AT THE SEC'S INTERNET SITE (HTTP://WWW.SEC.GOV). COPIES OF
ANY FILINGS
------------------
CONTAINING INFORMATION ABOUT TYSON CAN ALSO BE OBTAINED, WITHOUT CHARGE, BY
DIRECTING A REQUEST TO TYSON FOODS, INC., 2210 WEST OAKLAWN DRIVE,
SPRINGDALE, ARKANSAS 72762-6999, ATTENTION: OFFICE OF THE CORPORATE
SECRETARY (501) 290- 4000.
Tyson and certain other persons named below may be deemed to be
participants in the solicitation of proxies. The participants in this
solicitation may include the directors and executive officers of Tyson. A
detailed list of the names of Tyson's directors and officers is contained
in Tyson's proxy statement for its 2001 annual meeting, which may be
obtained without charge at the SEC's Internet site (http://www.sec.gov) or
by directing a request to Tyson at the address provided above.
As of the date of this communication, none of the foregoing participants,
individually beneficially owns in excess of 5% of IBP's common stock.
Except as disclosed above and in Tyson's proxy statement for its 2001
annual meeting and other documents filed with the SEC, to the knowledge of
Tyson, none of the directors or executive officers of Tyson has any
material interest, direct or indirect, by security holdings or otherwise,
in Tyson or IBP.
This communication is not an offer to purchase shares of IBP, nor is it an
offer to sell shares of Tyson Class A common stock which may be issued in
any proposed merger with IBP or exchange offer for IBP shares. Any issuance
of Tyson Class A common stock in any proposed merger with IBP or exchange
offer for IBP shares would have to be registered under the Securities Act
of 1933, as amended, and such Tyson stock would be offered only by means of
a prospectus complying with the Act.