Tyson Withstanding Rough Start to New Year

Tyson Foods Inc. spent the better part of 2001 shoring up its stormy acquisition of IBP Inc. But, by the looks of things early into 2002, the fox has penetrated the hen house, and the feathers are flying at the Springdale poultry producer.

Few companies could likely overcome the problems Tyson is facing and keep their heads above water on Wall Street, much less flourish. The company said its earnings per share for the first fiscal quarter, which ended Dec. 29, will be 34-36 cents, up from previous estimates of 22-27 cents. And shares closed Jan. 4 at $12.54, the firm’s highest level in seven months.

The U.S. Justice Department’s 36-count indictment that claims Tyson had a corporate conspiracy to smuggle illegal aliens for work at its processing plants has been vigorously challenged by company officials.

Government contracts could be at stake. A $100 million forfeiture of profits from the illegal aliens’ work is at stake. And a violation of Tyson’s probation, stemming from the giving of illegal gifts to former agricultural Secretary Mike Espy, is charged.

Through all of the charges and counter denials, Tyson appears ready for a long line of battles. And some experts are making Tyson the odds-on favorite.

Analyst John McMillin of Prudential Securities said of Tyson’s latest legal fight: “This too shall pass. When the dust settles, the financial impact to Tyson, if any, should be far less than the hit to Tyson’s market cap. Sooner or later, investors will begin to look at fundamentals, which are the best they have been in years.”

In fact, McMillin believes Tyson shares will be “closer to $15 per share a year from now, a nice potential return from current levels.”

Meanwhile, the No. 2 U.S. poultry company, Pilgrim’s Pride Corp. of Pittsburg, Texas, warned on Jan. 9 that its first-quarter earnings will be lower than previously expected. Its original target of about 40 cents earnings per share has been dropped to about 30 cents.

Tyson investors have plenty to cluck about. It has repaid more than $550 million of debt, bringing its debt load to $4.35 billion at the end of the first quarter. Analysts had estimated that figure would be much higher following the $4.6 billion acquisition of IBP.

In a two-week stretch following McMillin’s statements, Tyson shareholders enjoyed a 21 percent gain. As Monica Rivituso of SmartMoney.com said, “That ain’t chicken feed.”

The saga with the Immigration and Naturalization Service and its undercover agents’ findings initially looked bleak for Tyson. However, the more that has come out of that story, the more credence there is to Tyson’s arguments.

Those agents admitted to delivering eight illegal aliens to some Tyson plants in a sting operation to catch managers allowing the illegal aliens to work.

Amador Anchondo-Rascon, who worked for Tyson briefly earlier in the last decade, and who pled guilty Jan. 7 in Chattanooga, Tenn., to conspiracy to violate the immigration laws, is hardly a credible witness.

Anchondo-Rascon has reportedly made a deal that could lighten his possible sentence of five years in prison, a $250,000 fine and forfeiture of any gains from the alleged conspiracy with Tyson that prosecutors say started in 1994.

U.S. Attorney John MacCoon told Anchondo-Rascon that his sentence, which could include deportation, would depend partly on how much he helps prosecutors. The judge set a May 20 sentencing hearing.

Anchondo-Rascon, a 43-year-old native of Mexico, has been held for the past 14 months without bail in Shelbyville, Tenn., where he once worked for Tyson and most recently ran a local grocery store.

Shelbyville police have described Anchondo-Rascon as the “Boss of Bosses” in the local underworld of forged document and undocumented worker trafficking.