Springdale, AR - Tyson Foods, Inc. announced operating results for the fourth quarter and fiscal year ended October 3, 1998. The Company's 1998 fiscal year included 53 weeks with the fourth quarter consisting of 14 weeks compared to 52 weeks and 13 weeks for fiscal and fourth quarter 1997.
Record sales for the fourth quarter of fiscal 1998 were $2.07 billion compared to $1.66 billion last year, an increase of 24.5 percent. The increase in sales is mainly due to the acquisition of Hudson Foods on January 9, 1998, resulting in an increase of 17.3 percent in consumer poultry volume, the Company's core business, and a 6.4 percent increase in consumer poultry average sales price.
Gross profits for the fourth quarter increased 22 percent to $316.1 million from last year's $259.1 million. Gross profits for the fourth quarter before other charges increased 30 percent to $336.6 million. Gross margin decreased 31 basis points to 15.3 percent from last year's 15.6 percent. Gross margin before other charges increased 68 basis points to 16.3 percent. A $214.6 million charge for asset impairment and other items ($154.8 million after-tax) was recorded in the fourth quarter resulting in an $89.7 million after-tax loss ($.39 diluted earnings per share). Earnings, before the $214.6 million charge, increased $17.4 million to $65.1 million ($.28 diluted earnings per share) for the fourth quarter of fiscal 1998 compared to $47.7 million ($.22 diluted earnings per share) from the same quarter last year.
Record sales for fiscal 1998 were $7.41 billion compared to $6.36 billion last year, an increase of 16.7 percent. The increase in sales is mainly due to the acquisition of Hudson Foods, resulting in an increase of 21 percent in consumer poultry volume offset somewhat by a decrease of 5.1 percent in consumer poultry average sales price.
Gross profits for fiscal 1998 increased 11.2 percent to $1.15 billion from last year's $1.04 billion. Gross profits for fiscal 1998 before other charges increased 13.2 percent to $1.17 billion. Gross margin decreased 77 basis points to 15.6 percent from last year's 16.3 percent. Gross margin before other charges decreased 49 basis points to 15.8 percent. Earnings decreased $160.7 million to $25.1 million ($.11 diluted earnings per share) for fiscal 1998 compared to $185.8 million ($.85 diluted earnings per share) for fiscal 1997. Earnings, before the $214.6 million charge ($154.8 million after-tax), decreased $5.9 million to $179.9 million ($.79 diluted earnings per share) compared to last year.
As previously announced the Company's Board of Directors approved management's proposed restructure plan on August 28, 1998, which resulted in asset impairment and related charges totaling $142.2 million and other one time charges totaling $72.4 million in the fourth quarter. The restructuring is in furtherance of the Company's previously stated objective to focus on its core business, chicken. Further, the Company intends to continue the rationalization of its seafood assets. This rationalization may include divestiture, redeployment, and other possible business combinations, exploring all alternatives in an orderly fashion. The recent acquisition of Hudson Foods and the assimilation of Hudson Food's facilities and operations into the Company's business have permitted the Company to review and rationalize the productive capabilities and cost structure of its core business. The restructuring includes, among other things, the closure of 8 plants and feedmills resulting in work force reductions, the writedown of excess of investments over net assets acquired allocated to certain facilities, the reconfiguration of various production facilities and the writedown of certain seafood assets to estimated net realizable value.
The $214.6 million charge recorded during the fourth quarter consists of $142.2 million for asset impairment of property, plant and equipment, writedown of related excess of investments over net assets acquired and related severance costs; $48.4 million of currency losses in the Company's export business to Russia which has been adversely affected by continuing economic problems and $24 million of other charges related to worker's compensation and related employment practice liabilities. These charges are classified on the Income Statement as Asset Impairment and Other Charges ($142.2 million), Selling Expenses ($48.4 million), Cost of Sales ($20.5 million) and Other Expenses ($3.5 million). The anticipated three year net benefit to cash flows, including anticipated proceeds from the sale of certain assets identified for disposition is approximately $130 million. The restructuring is expected to result in annual after-tax savings of $12 to $15 million through reduced depreciation, amortization and production costs. The future cash outflows for severance and related costs is not expected to be material.
Wayne Britt, the Company's Chief Executive Officer stated: 1998 is now behind us. Our financial results reflect the impact of the Hudson Foods acquisition, the worldwide economic instability, along with the collapse of the Russian marketplace for our products and the restructuring program initiated in our fourth quarter. We feel good about the manner in which we managed through these issues and believe that future results will be improved by the decisions we made related to them. Fiscal 1999 is beginning with some positive dynamics, lower input cost of grain, and favorable domestic demand and pricing for chicken, however the landscape for our export business remains unsettled and there are severe market pressures in our live swine group.
John Tyson, the Company's Chairman of the Board of Directors stated: The management team has made the right decisions to position the Company for the next fiscal year and beyond. Our responsibility is now to implement these decisions.
Tyson Foods, Inc. is the world's largest fully-integrated producer, processor and marketer of chicken and poultry-based food products.
Meat Industry Insights News Service
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