Edgar Filing: TYSON FOODS INC

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(X)	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
	EXCHANGE ACT OF 1934

For the quarterly period ended March 29, 2008

	OR

( )	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
	EXCHANGE ACT OF 1934

For the transition period from _________to________

001-14704

(Commission File Number)

______________

TYSON FOODS, INC.

(Exact name of registrant as specified in its charter)

______________

Delaware	71-0225165
(State or other jurisdiction	(I.R.S. Employer Identification No.)
of incorporation or organization)

2210 West Oaklawn Drive, Springdale, Arkansas	72762-6999
(Address of principal executive offices)	(Zip Code)

(479) 290-4000
(Registrant’s telephone number, including area code)

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 (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x

Accelerated filer o

Non-accelerated filer o (Do not check if a smaller reporting company)

Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of March 29, 2008.

Class	Outstanding Shares
Class A Common Stock, $0.10 Par Value (Class A stock)	285,074,786
Class B Common Stock, $0.10 Par Value (Class B stock)	70,021,155

TYSON FOODS, INC.

INDEX


PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements			PAGE

			Consolidated Condensed Statements of Operations for the Three and Six Months Ended March 29, 2008, and March 31, 2007	3

			Consolidated Condensed Balance Sheets March 29, 2008, and September 29, 2007	4

			Consolidated Condensed Statements of Cash Flows for the Six Months Ended March 29, 2008, and March 31, 2007	5

			Notes to Consolidated Condensed Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			23

Item 3.	Quantitative and Qualitative Disclosures About Market Risk			33

Item 4.	Controls and Procedures			35

PART II. OTHER INFORMATION

Item 1.		Legal Proceedings		35

Item 1A.		Risk Factors		38

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		38

Item 3.		Defaults Upon Senior Securities		38

Item 4.		Submission of Matters to a Vote of Security Holders		39

Item 5.		Other Information		39

Item 6.		Exhibits		40

SIGNATURES				41

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

TYSON FOODS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(In millions, except per share data)

(Unaudited)

	Three Months Ended						Six Months Ended
	March 29, 2008			March 31, 2007			March 29, 2008			March 31, 2007

Sales	$	6,612		$	6,501		$	13,378		$	13,059
Cost of Sales		6,306			6,138			12,767			12,359
		306			363			611			700

Selling, General and Administrative		232			205			447			395
Other Charges		30			-			36			2

Operating Income		44			158			128			303
Other (Income) Expense:
Interest income		(2	)		(2	)		(4	)		(4	)
Interest expense		55			58			108			119
Other, net		(1	)		(5	)		(20	)		(5	)
		52			51			84			110

Income (Loss) before Income Taxes		(8	)		107			44			193
Income Tax Expense (Benefit)		(3	)		39			15			68
Net Income (Loss)	$	(5	)	$	68		$	29		$	125

Weighted Average Shares Outstanding:
Class A Basic		280			271			280			268
Class B Basic		70			77			70			80
Diluted		350			354			355			354

Earnings (Loss) Per Share:
Class A Basic	$	(0.02	)	$	0.20		$	0.08		$	0.37
Class B Basic	$	(0.01	)	$	0.18		$	0.08		$	0.33
Diluted	$	(0.02	)	$	0.19		$	0.08		$	0.35

Cash Dividends Per Share:
Class A	$	0.040		$	0.040		$	0.080		$	0.080
Class B	$	0.036		$	0.036		$	0.072		$	0.072

See accompanying Notes to Consolidated Condensed Financial Statements.

TYSON FOODS, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

(In millions, except share and per share data)

	(Unaudited) March 29, 2008		September 29, 2007
Assets
Current Assets:
Cash and cash equivalents	$	53	$	42
Accounts receivable, net		1,074		1,246
Inventories		2,439		2,238
Other current assets		213		70
Total Current Assets		3,779		3,596
Net Property, Plant and Equipment		3,615		3,693
Goodwill		2,487		2,485
Intangible Assets		125		126
Other Assets		361		327
Total Assets	$	10,367	$	10,227

Liabilities and Shareholders’ Equity
Current Liabilities:
Current debt	$	265	$	137
Trade accounts payable		1,014		1,050
Other current liabilities		830		928
Total Current Liabilities		2,109		2,115
Long-Term Debt		2,689		2,642
Deferred Income Taxes		361		367
Other Liabilities		454		372
Shareholders’ Equity:
Common stock ($0.10 par value):
Class A-authorized 900 million shares:
issued 300 million shares at March 29, 2008,
and September 29, 2007		30		30
Class B-authorized 900 million shares:
issued 70 million shares at March 29, 2008,
and September 29, 2007		7		7
Capital in excess of par value		1,891		1,877
Retained earnings		2,977		2,993
Accumulated other comprehensive income		81		50
		4,986		4,957
Less treasury stock, at cost-
15 million shares at March 29, 2008,
and 14 million shares at September 29, 2007		232		226
Total Shareholders’ Equity		4,754		4,731
Total Liabilities and Shareholders’ Equity	$	10,367	$	10,227

See accompanying Notes to Consolidated Condensed Financial Statements.

TYSON FOODS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

	Six Months Ended
	March 29, 2008			March 31, 2007
Cash Flows From Operating Activities:
Net income	$	29		$	125
Depreciation and amortization		251			256
Deferred income taxes and other, net		33			52
Net changes in working capital		(169	)		(90	)
Cash Provided by Operating Activities		144			343

Cash Flows From Investing Activities:
Additions to property, plant and equipment		(210	)		(94	)
Proceeds from sale of property, plant and equipment		19			8
Proceeds from sale of investment		21			-
Proceeds from sale of marketable securities		63			79
Purchases of marketable securities		(83	)		(79	)
Proceeds from sale of short-term investment		-			770
Other, net		-			6
Cash Provided by (Used for) Investing Activities		(190	)		690

Cash Flows From Financing Activities:
Net borrowings (payments) on revolving credit facilities		195			(94	)
Payments on debt		(31	)		(949	)
Proceeds from borrowings of debt		3			-
Purchases of treasury shares		(16	)		(38	)
Dividends		(28	)		(28	)
Increase (decrease) in negative book cash balances		(73	)		46
Stock options exercised and other, net		4			33
Cash Provided by (Used for) Financing Activities		54			(1,030	)

Effect of Exchange Rate Change on Cash		3			3

Increase in Cash and Cash Equivalents		11			6
Cash and Cash Equivalents at Beginning of Year		42			28
Cash and Cash Equivalents at End of Period	$	53		$	34

See accompanying Notes to Consolidated Condensed Financial Statements.

TYSON FOODS, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1: ACCOUNTING POLICIES

BASIS OF PRESENTATION

The consolidated condensed financial statements have been prepared by Tyson Foods, Inc. (collectively, "the Company," "we," "us" or "our"). Certain information and accounting policies and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. Although we believe the disclosures contained herein are adequate to make the information presented not misleading, these consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our annual report on Form 10-K for the fiscal year ended September 29, 2007. Preparation of consolidated condensed financial statements requires us to make estimates and assumptions. These estimates and assumptions affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated condensed financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

We believe the accompanying consolidated condensed financial statements contain all adjustments, including normal recurring accruals, necessary to present fairly our financial position as of March 29, 2008, the results of operations for the three and six months ended and cash flows for the six months ended March 29, 2008, and March 31, 2007. Results of operations and cash flows are not necessarily indicative of results to be expected for the full year.

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” an interpretation of FASB Statement No. 109 (FIN 48). FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. We adopted FIN 48 at the beginning of fiscal 2008. The adoption of FIN 48 resulted in a change to the opening Consolidated Condensed Balance Sheets as follows: $32 million increase to Other Current Assets, $17 million decrease to Other Current Liabilities, $106 million increase to Other Liabilities, $40 million decrease to Deferred Income Taxes and $17 million decrease to Retained Earnings. Included in these changes we recognized a $120 million increase in the liability for unrecognized tax benefits and a $21 million increase in the related liability for interest and penalties for a total of $141 million.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (SFAS No. 157). SFAS No. 157 provides guidance for using fair value to measure assets and liabilities. This standard also responds to investors’ requests for 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. SFAS No. 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115” (SFAS No. 159). This statement provides companies with an option to report selected financial assets and financial liabilities at fair value. SFAS No. 157 and SFAS No. 159 are effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years; therefore, we expect to adopt SFAS No. 157 and SFAS No. 159 at the beginning of fiscal 2009 for financial assets and financial liabilities. In accordance with FASB Staff Position 157-2, we will begin measuring the fair value of nonfinancial assets and nonfinancial liabilities at the beginning of fiscal 2010. We are in process of evaluating the potential impacts of SFAS No. 157 and SFAS No. 159.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (SFAS No. 160). SFAS No. 160 amends Accounting Research Bulletin No. 51, “Consolidated Financial Statements” to establish accounting and reporting standards for a noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. This statement clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the

consolidated entity and should be reported as equity in the consolidated financial statements, rather than in the liability or mezzanine section between liabilities and equity. SFAS No. 160 also requires consolidated net income be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest. The impact of SFAS No. 160 will not have a material impact on our current Consolidated Condensed Financial Statements. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008; therefore, we expect to adopt SFAS No. 160 at the beginning of fiscal 2010.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141R, “Business Combinations” (SFAS No. 141R). SFAS No. 141R establishes principles and requirements for how an acquirer in a business combination: 1) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; 2) recognizes and measures the goodwill acquired in the 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 the business combination. SFAS No. 141R 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 expect to adopt SFAS No. 141R for any business combinations entered into beginning in fiscal 2010.

In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133” (SFAS No. 161). SFAS No. 161 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 under Statement 133 and its related interpretations; and 3) how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008; therefore, we expect to adopt SFAS No. 161 in the first quarter of fiscal 2010.

NOTE 2: DISPOSITIONS AND OTHER CHARGES

On February 29, 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 the second quarter of fiscal 2008, we recorded charges of $13 million for estimated impairment charges. This amount is reflected in the Chicken segment’s Operating Income (Loss) and included in the Consolidated Condensed Statements of Operations in Other Charges. No material adjustments to the accrual are anticipated.

On January 25, 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 will still be 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 the second quarter of fiscal 2008, we recorded charges of $10 million for estimated 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 Condensed Statements of Operations in Other Charges. As of March 29, 2008, $6 million of other closing costs had been paid. No material adjustments to the accrual are anticipated.

In the first quarter of fiscal 2008, 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 Condensed Statements of Operations.

In the first quarter of 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 the first quarter of 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 Condensed Statements of Operations in Other Charges. As of March 29, 2008, $3 million of employee termination benefits had been paid. No material adjustments to the accrual are anticipated.

NOTE 3: FINANCIAL INSTRUMENTS

We purchase certain commodities, such as grains, livestock and natural gas 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. 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 surrounding inventories on hand or anticipated purchases of inventories or supplies are recorded in cost of sales. Changes in market value of derivatives used in our risk management activities surrounding forward sales contracts are recorded in sales. We generally do not hedge anticipated transactions beyond 12 months.

We had derivative related balances of $56 million and $16 million recorded in other current assets at March 29, 2008, and September 29, 2007, respectively, and $1 million and $48 million in other current liabilities at March 29, 2008, and September 29, 2007, respectively.

Cash flow hedges: We use derivatives as a tool to help manage the financial and commodity market risks of our business operations. Derivative products, such as futures and options, are designated to be a hedge against changes in the amount of future cash flows related to commodities procurement.

The effective portion of the cumulative gain or loss on the derivative instrument is reported as a component of Accumulated Other Comprehensive Income in Shareholders’ Equity and recognized into earnings in the same period or periods during which the hedged transaction affects earnings (for grain commodity hedges, when the chickens that consumed the hedged grain are sold). The remaining cumulative gain or loss on the derivative instrument in excess of the cumulative change in the present value of the future cash flows of the hedged item, if any, is recognized in earnings during the period of change. Ineffectiveness related to our cash flow hedges was not significant during the three and six months ended March 29, 2008, and March 31, 2007.

Derivative products related to grain procurement that meet the criteria for hedge accounting and are so designated, are considered cash flow hedges, as they hedge against changes in the amount of future cash flows related to commodities procurement. We do not purchase derivative products related to grain procurement in excess of our physical grain consumption requirements. Related to grain hedges, there were $18 million of net gains recorded in accumulated other comprehensive income at March 29, 2008. These gains will be recognized within the next 12 months. Of these gains, the portion resulting from our open hedge positions was a net gain of $6 million as of March 29, 2008.

Fair value hedges: We designate certain futures contracts as fair value hedges of firm commitments to purchase market hogs for slaughter and natural gas for the operation of our plants. From time to time, we also enter into foreign currency forward contracts to hedge changes in the fair value of receivables and purchase commitments arising from changes in the exchange rates of foreign currencies. The fair value of the foreign exchange contracts was not significant as of March 29, 2008, and September 29, 2007. Changes in the fair value of a derivative that is designated and qualifies as a fair value hedge, along with the gain or loss on the hedged asset or liability attributable to the hedged risk (including gains or losses on firm commitments), are recorded in current period earnings. Ineffectiveness results when the change in the fair value of the hedge instrument differs from the change in fair value of the hedged item. Ineffectiveness related to fair value hedges was not significant during the three and six months ended March 29, 2008, and March 31, 2007.

Undesignated positions: We hold positions as part of our risk management activities, primarily futures and options for grains, livestock and natural gas, for which we do not apply hedge accounting, but instead mark these positions to fair value through earnings at each reporting date. We generally do not enter into undesignated positions beyond 18 months. Related to grain positions for which we did not apply hedge accounting, we recognized pretax net gains of approximately $41 million and $72 million in cost of sales for the three and six months ended March 29, 2008, respectively, which included an unrealized pretax gain

on open mark-to-market futures positions of approximately $25 million as of March 29, 2008. We recognized pretax net gains of $26 million and $67 million for the three and six months ended March 31, 2007, respectively.

We enter into certain forward sales of boxed beef and boxed pork and forward purchases of cattle at fixed prices. The fixed price sales contracts lock in the proceeds from a sale in the future and the fixed cattle purchases lock in the cost. However, the cost of the livestock and the related boxed beef and 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 pork and forward purchases of cattle, 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. In connection with these livestock futures, we recorded realized and unrealized net gains of $42 million and $67 million for the three and six months ended March 29, 2008, respectively, which included an unrealized pretax gain on open mark-to-market futures positions of approximately $16 million as of March 29, 2008. We recorded realized and unrealized net losses of $14 million and $10 million for the three and six months ended March 31, 2007, respectively.

NOTE 4: INVENTORIES

Processed products, livestock and supplies and other are valued at the lower of cost or market. Cost includes purchased raw materials, live purchases, growout (primarily feed, contract grower pay and catch and haul costs), labor and manufacturing and production overhead related to the purchase and production of inventories. Total inventory consists of the following (in millions):

	March 29, 2008		September 29, 2007
Processed products:
Weighted-average method - chicken and prepared foods	$	866	$	773
First-in, first-out method - beef and pork		518		514
Livestock - first-in, first-out method		699		637
Supplies and other - weighted-average method		356		314
Total inventory	$	2,439	$	2,238

NOTE 5: PROPERTY, PLANT AND EQUIPMENT

The major categories of property, plant and equipment and accumulated depreciation, at cost, are as follows (in millions):

	March 29, 2008		September 29, 2007
Land	$	107	$	108
Buildings and leasehold improvements		2,479		2,465
Machinery and equipment		4,386		4,337
Land improvements and other		209		203
Buildings and equipment under construction		304		253
		7,485		7,366
Less accumulated depreciation		3,870		3,673
Net property, plant and equipment	$	3,615	$	3,693

NOTE 6: OTHER CURRENT LIABILITIES

Other current liabilities are as follows (in millions):

	March 29, 2008		September 29, 2007
Self-insurance reserves	$	235	$	259
Accrued salaries, wages and benefits		227		249
Other		368		420
Total other current liabilities	$	830	$	928

NOTE 7: COMMITMENTS

We guarantee debt of outside third parties, which involve 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 March 29, 2008, was $69 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 seven years. The maximum potential amount of the residual value guarantees is $54 million, of which $21 million would be recoverable through various recourse provisions and an 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 March 29, 2008, and September 29, 2007, no material liabilities for guarantees were recorded.

NOTE 8: LONG-TERM DEBT

The major components of long-term debt are as follows (in millions):

	Maturity	March 29, 2008		September 29, 2007

Revolving credit facility	2010	$	-	$	-
Senior notes (rates ranging from 6.85% to 8.25%)	2010–2028		2,455		2,475
Lakeside term loan (3.68% effective rate at 3/29/08)	2009		25		25
Accounts receivable securitization (3.76%
effective rate at 3/29/08)	2008, 2010		408		213
Other	Various		66		66
Total debt			2,954		2,779
Less current debt			265		137
Total long-term debt		$	2,689	$	2,642

We have an unsecured revolving credit facility totaling $1.0 billion that supports short-term funding needs and letters of credit. The facility expires in September 2010. At March 29, 2008, we had outstanding letters of credit totaling $275 million, none of which were drawn upon, issued primarily in support of workers’ compensation insurance programs and derivative activities. The amount available as of March 29, 2008, was $725 million.

We have a receivables purchase agreement with three co-purchasers to sell up to $750 million of trade receivables consisting of $375 million expiring in August 2008 and $375 million expiring in August 2010. The receivables purchase agreement has been accounted for as a borrowing and has an interest rate based on commercial paper issued by the co-purchasers. Under this agreement, substantially all of our accounts receivable are sold to a special purpose entity, Tyson Receivables Corporation (TRC), which is a wholly-owned consolidated subsidiary of the Company. TRC has its own creditors entitled to be satisfied out of all of the assets of TRC prior to any value becoming available to the Company as TRC’s equity holder. At March 29, 2008, there was $204 million outstanding under the receivables purchase agreement expiring in August 2008 and $204 million under the agreement expiring in August 2010.

Our debt agreements contain various covenants, the most restrictive of which contain a maximum allowed leverage ratio and a minimum required interest coverage ratio. We were in compliance with all covenants at March 29, 2008.

Tyson Fresh Meats, Inc., a wholly-owned subsidiary of the Company, has fully and unconditionally guaranteed $1.0 billion of senior unsecured notes due April 1, 2016. The following condensed consolidating financial information is provided for the Company, as issuer, and for TFM, as guarantor, as an alternative to providing separate financial statements for the guarantor.

The following financial information presents condensed consolidating financial statements, which include Tyson Foods, Inc. (TFI Parent); Tyson Fresh Meats, Inc. (TFM Parent); the Non-Guarantor Subsidiaries on a combined basis; the elimination entries necessary to consolidate the TFI Parent, TFM Parent and the Non-Guarantor Subsidiaries; and Tyson Foods, Inc. on a consolidated basis.

Condensed Consolidating Statement of Operations for the three months ended March 29, 2008														in millions
								Non-
								Guarantor
	TFI Parent			TFM Parent				Subsidiaries				Eliminations			Total
Net Sales	$	(9	)		$	3,633			$	3,175		$	(187)			$	6,612
Cost of Sales	54				3,511				2,928			(187)				6,306
	(63		)		122				247			-				306
Operating Expenses:
Selling, general and administrative	29				51				152			-				232
Other charges	-				17				13			-				30
Operating Income (Loss)	(92		)		54				82			-				44

Other (Income) Expense:
Interest expense, net	48				6				(1		)	-				53
Other, net	1				-				(2		)	-				(1)
Equity in net earnings of subsidiaries	(86		)		(7		)		-			93				-
	(37		)		(1		)		(3		)	93				52

Income (Loss) before Income Taxes	(55		)		55				85			(93)				(8)
Income Tax Expense (Benefit)	(50		)		17				30			-				(3)
Net Income (Loss)	$	(5	)		$	38			$	55		$	(93)			$	(5)

Condensed Consolidating Statement of Operations for the three months ended March 31, 2007														in millions
								Non-
								Guarantor
	TFI Parent			TFM Parent				Subsidiaries				Eliminations			Total
Net Sales	$	12			$	3,622			$	3,044		$	(177	)		$	6,501
Cost of Sales	(33		)		3,535				2,813			(177		)		6,138
	45				87				231			-				363
Operating Expenses:
Selling, general and administrative	31				50				124			-				205
Other charges	-				-				-			-				-
Operating Income	14				37				107			-				158

Other (Income) Expense:
Interest expense, net	46				8				2			-				56
Other, net	(1		)		(1		)		(3		)	-				(5		)
Equity in net earnings of subsidiaries	(88		)		(10		)		-			98				-
	(43		)		(3		)		(1		)	98				51

Income before Income Taxes	57				40				108			(98		)		107
Income Tax Expense (Benefit)	(11		)		11				39			-				39
Net Income	$	68			$	29			$	69		$	(98	)		$	68

Condensed Consolidating Statement of Operations for the six months ended March 29, 2008														in millions
								Non-
								Guarantor
	TFI Parent			TFM Parent				Subsidiaries				Eliminations			Total
Net Sales	$	3			$	7,430			$	6,341		$	(396)			$	13,378
Cost of Sales	49				7,262				5,852			(396)				12,767
	(46		)		168				489			-				611
Operating Expenses:
Selling, general and administrative	54				96				297			-				447
Other charges	1				18				17			-				36
Operating Income (Loss)	(101		)		54				175			-				128

Other (Income) Expense:
Interest expense, net	96				11				(3		)	-				104
Other, net	(12		)		(5		)		(3		)	-				(20)
Equity in net earnings of subsidiaries	(149		)		(26		)		-			175				-
	(65		)		(20		)		(6		)	175				84

Income (Loss) before Income Taxes	(36		)		74				181			(175)				44
Income Tax Expense (Benefit)	(65		)		17				63			-				15
Net Income	$	29			$	57			$	118		$	(175)			$	29

Condensed Consolidating Statement of Operations for the six months ended March 31, 2007													in millions
								Non-
								Guarantor
	TFI Parent			TFM Parent				Subsidiaries			Eliminations			Total
Net Sales	$	23			$	7,360			$	6,055	$	(379)			$	13,059
Cost of Sales	(64		)		7,218				5,584		(379)				12,359
	87				142				471		-				700
Operating Expenses:
Selling, general and administrative	54				89				252		-				395
Other charges	1				1				-		-				2
Operating Income	32				52				219		-				303

Other (Income) Expense:
Interest expense, net	93				16				6		-				115
Other, net	(1		)		(20		)		16		-				(5		)
Equity in net earnings of subsidiaries	(164		)		(17		)		-		181				-
	(72		)		(21		)		22		181				110

Income before Income Taxes	104				73				197		(181		)		193
Income Tax Expense (Benefit)	(21		)		20				69		-				68
Net Income	$	125			$	53			$	128	$	(181	)		$	125

Condensed Consolidating Balance Sheet as of March 29, 2008											in millions
						Non-
						Guarantor
	TFI Parent		TFM Parent			Subsidiaries			Eliminations			Total
Assets
Current Assets:
Cash and cash equivalents	$	3		$	-		$	50	$	-			$	53
Accounts receivable, net	1			419			1,393		(739		)		1,074
Inventories	1			669			1,769		-				2,439
Other current assets	189			30			58		(64		)		213
Total Current Assets	194			1,118			3,270		(803		)		3,779
Net Property, Plant and Equipment	43			983			2,589		-				3,615
Goodwill	-			1,501			986		-				2,487
Intangible Assets	-			56			69		-				125
Other Assets	113			101			184		(37		)		361
Investment in subsidiaries	8,374			1,024			-		(9,398		)		-
Total Assets	$	8,724		$	4,783		$	7,098	$	(10,238	)		$	10,367
Liabilities and Shareholders’ Equity
Current Liabilities:
Current debt	$	219		$	-		$	46	$	-			$	265
Trade accounts payable	18			426			570		-				1,014
Other current liabilities	1,008			118			507		(803		)		830
Total Current Liabilities	1,245			544			1,123		(803		)		2,109
Long-Term Debt	2,436			249			4		-				2,689
Deferred Income Taxes	-			77			321		(37		)		361
Other Liabilities	289			105			60		-				454
Shareholders’ Equity	4,754			3,808			5,590		(9,398		)		4,754
Total Liabilities and Shareholders’ Equity	$	8,724		$	4,783		$	7,098	$	(10,238	)		$	10,367

Condensed Consolidating Balance Sheet as of September 29, 2007

in millions

Non-

Guarantor

TFI Parent

TFM Parent

Subsidiaries

Eliminations

Total

Assets

Current Assets: