010804 Tyson Third-Quarter Earnings Fall SharplyAugust 2, 2001Chicago - Tyson Foods Inc. said that fiscal third-quarter earnings fell sharply, as higher promotional costs, increased general expenses, and a glut in the chicken-breast market all took a toll. Tyson expects to complete its acquisition of pork and beef processor IBP Inc. by early October, Chief Financial Officer Steve Hankins said in a conference call. Shares of Tyson fell 52 cents, or 5%, to close at $9.88 on the New York Stock Exchange. Tyson shares are down 22.5% since the start of the year, underperforming the Standard & Poor's 500 index by about 18%. Also hurting Tyson was the strong U.S. dollar, which cut $1.4 million from third-quarter earnings, after currency translation added $1.8 million to the bottom line a year ago, Tyson said. The company reported earnings of $19.4 million, or 9 cents a diluted share for the third quarter ended June 30, compared with $40.5 million, or 18 cents a share, a year ago. Analysts' estimates ranged from 6 cents per share to 10 cents, with a consensus at 7 cents, according to market research firm Thomson Financial/First Call. Springdale, Arkansas-based Tyson said in April it expected earnings per share of 6 cents to 10 cents for the third quarter. Third-quarter sales rose to $1.89 billion from $1.81 billion a year ago. General and administrative expenses rose to $51.6 million in the third quarter from $33.7 million a year ago. “While our performance was at the high end of our previous guidance, we clearly did not perform to our potential,” Chief Executive John Tyson said in a statement. The company forecast fourth-quarter earnings per share of 8 cents to 12 cents a share, excluding results from IBP. Analysts' fourth-quarter estimates ranged from 8 cents per share to 20 cents, with a consensus at 15 cents, according to First Call. The projections exclude anticipated results from IBP. Tyson earned 8 cents a share in the year- ago quarter. IBP LEGAL FEES DRIVE THIRD-QUARTER EXPENSES HIGHER Nearly all of the $12 million to $13 million one-time increase in general and administrative expenses in the third quarter came from IBP-related legal costs, the company said. Tyson agreed in June to a cash and stock deal of about $2.7 billion for IBP, which will form the largest U.S. meat company -- ending an often contentious, on-again off-again dance. Tyson outbid rival Smithfield Foods Inc. for IBP, but tried to back out of the deal in March, alleging numerous breaches of the agreement including accounting irregularities at an IBP subsidiary. A judge forced the parties back together in June. Tyson expects shareholder lawsuits stemming from Tyson's attempt to back out of the deal to be settled soon, Hankins said. It expects the IBP deal to close within two months of the Aug. 3 deadline for the cash tender offer, Hankins said. Without the heavy promotional and IBP expenses, it would have been a nice quarter, said George Dahlman, food analyst at U.S. Bancorp Piper Jaffray. EXPENSES COMING UNDER CONTROL: ANALYST “There are a few holes, unit volumes are obviously down, but it looks like they are getting some of their expenses under control,” Dahlman said. Tyson processes 45 million birds a week and billions of pounds of chicken each year. Food-service sales rose 2% in the third quarter to $853.6 million, but profit from the segment fell, mainly due to increased promotional spending. Food service is the largest part of Tyson's business. Consumer products sales dipped slightly to $579.7 million from $580 million, but profits sank from a year ago due to different emphasis on products. International sales rose to $219.9 million from $141.9 million a year ago. “It seems pretty consistent with trends we are seeing in the industry regarding very strong demand for (chicken) wings and a strong export market,” said Christine McCracken, Midwest Research food analyst. “Unfortunately, breast meat markets don't show much of an improvement. There seems to still be an issue of too much chicken in inventory.”
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