Tyson Foods ends first quarter with liquidity of $1.1 billion, total debt of $3 billion

By Jennifer Lanning Drey

Portland, Ore., Jan. 26 - Tyson Foods, Inc. ended a difficult first quarter of fiscal 2009 with liquidity of $1.1 billion and total debt of almost $3.0 billion, Dennis Leatherby, the company's chief financial officer, reported during its earnings conference call held Monday.

The company was in compliance with both of its debt covenants at the Dec. 27 close of the quarter.

Tyson's EBITDA-to-interest ratio was approximately 3.0 times at the end of the period, compared to a minimum requirement of 2.85 times, and its debt-to-EBITDA ratio was around 4.2 times, compared to a maximum allowed ratio of 4.5 times.

"We expect these ratios to improve in the second quarter and beyond," Leatherby said.

The company had $166 million of cash on hand at Dec. 27.

Tyson reported a $112 million first-quarter net loss, compared to $34 million of net income in the same period of 2008. The loss was led by the company's chicken segment, which posted a $286 million operating loss.

The company said sales and operating results in the chicken segment were adversely impacted by an increase in grain costs and a net loss from commodity risk management activities related to grain purchases.

Accordingly, Tyson's biggest opportunity for future success lies within improving execution in its domestic chicken business, Leland Tollet, the company's interim chief executive officer, said during the call.

"We got away from the fundamentals, and it hurt our competitive position," Tollet said.

The company has begun making improvements in the chicken segment, which coupled with declining input costs are expected to produce an overall return to profitability in the next two quarters, Tollet said.

"Despite the challenges we faced in chicken, I am very confident about the direction Tyson Foods is headed and where we'll be in the future," Leatherby said.

Tyson is a Springdale, Ark.-based producer, distributor and marketer of chicken, beef, pork, prepared foods and related allied products.

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