Tyson Foods Legacy Forged On Tough Times, Risk Taking

by George Waldon  on Monday, Jan. 31, 2011 12:00 am  

Fifty years ago, a small poultry company in northwest Arkansas was riding out an especially rough market along with its peers across the nation.

Broiler prices were insufficient to cover production prices for 34 straight weeks during 1961. Tyson's Feed & Hatchery Inc. of Springdale was feeling the financial pinch as it burned through reserves.

Adding to the strain was the overhead associated with its one and only processing plant, which had opened in 1958.

The Springdale facility had been developed at the urging of Don Tyson, eldest son of company founder John W. Tyson. The plant, a one-shift operation capable of processing 120,000 chickens weekly, started up under a cloud of controversy.

Originally budgeted at $75,000, construction costs rose to $90,000. John Tyson wasn't happy, and it wouldn't be the last time someone questioned how Don Tyson spent money.

But his savvy, risk-taking ways shaped what became today's Tyson Foods Inc., an international leader with total revenue topping $28 billion that employs 117,000 at more than 300 facilities around the world.

Don Tyson's overshadowing leadership remained ever-present, even at the end when his official role with the company was noted simply: consultant.

His influence on corporate affairs was a constant for more than half a century, through his succession as chairman and CEO after his father's death in 1967 to his 2001 retirement and until his own death on Jan. 6.

"Tyson Foods was one of the first fully integrated folks in the business, and Don pursued the concept to the hilt," said Haskell E. Jackson, who worked for the company from 1960 to 1978.

Development of the first processing plant established the company as a vertically integrated poultry firm, handling chickens from egg to market.

But 50 years ago, Tyson Foods was just another small company trying to make its way in a developing industry. The tough times of the early 1960s served as a crucible in the company's formation.

"It really, really took us down and drove us to the first long-term debt position," Jackson said. "That money vanished like water in the desert, and we needed more capital."

That led to the company's initial public stock offering in April 1963, 100,000 shares that opened at $10.50. The $1 million IPO would help shore up operation funds and provide cash to expand.

Accountant Needed

Jackson joined Tyson in August 1960 as the "first degreed" accountant on staff after he got wind of a job opening for an office manager/chief accountant.

Jackson remembers meeting with Don Tyson and asking him what his duties would involve.

"His exact words were: 'Hell, I don't know what I need. My accountant told me I needed an accountant.'"

Tyson was referring to the advice of Harry Erwin, a Little Rock accountant who did tax consulting and audit work for the company. The family business was growing and needed more hands on deck.

"Don told everyone his goal was to expand, and by and by, the goal became to be the biggest in the industry," Jackson said.

Internal growth fueled by retained earnings wasn't fast enough to suit Tyson. That meant hitting the acquisition trail to buy capacity and manpower.

The company's first outing involved Garrett Poultry Co. of Rogers, with its processing plant and supporting hatchery and feed mill.

As Jackson recalls, the transaction amounted to about $250,000, with $50,000 down as non-refundable earnest money.

Donald "Buddy" Wray joined Tyson as a field service representative working with growers in 1961 and held a variety of posts with the company over the years. He remembers the tension-filled drama surrounding the IPO.

Wray said John W. Tyson had a lot riding on the deal, which was coming down to the wire.

"Don's daddy had made a commitment with Mr. Garrett, but he didn't have the capital to do it if the stock sale didn't go through," said Wray, who retired in 2000 as president and chief operating officer of the company.

"He was extremely nervous because the underwriters were taking their easy time getting everything done.

"It got done almost as the deal was going to expire, and Mr. Tyson was worried because he didn't want to lose his earnest money."

"From the time of the IPO onward, it was a rapid pace," Haskell Jackson said. "Don's perspective was, 'While I've got my hook in the water, I'm going to keep fishing.'"

And Tyson never took his hook out of the water when it came to trying to land more acquisitions to build the company.

'Like the Wild, Wild West'

Things were still hopping when Gerald Johnston joined Tyson Foods as a cost and budget manager in 1970.

"It was kind of like the wild, wild West," said Johnston, who later became executive vice president and chief financial officer at the company until his 1996 retirement. "It was a very exciting time, and the opportunities were so great."

Bob Womack joined Tyson in 1970 as a credit manager and held a variety of executive posts, including sales, acquisitions and division president.

By his count, Tyson Foods completed 17 acquisitions during his 24-year stint with the company.

"We were always looking for bolt-on acquisitions, something that would fit our sphere of expertise," Womack said.

Among the acquisition highlights are Holly Farms, $1.4 billion in 1989, and beef giant IBP Inc., $4.6 billion in 2001.

"Don always recognized people potential and the synergistic effect of business combinations," Haskell Jackson said.

"That was always the guiding principle he worked on. I don't know where he picked it up, but he had it early on.

"He always focused on the intangible benefits of a business more so than his dad, who focused on the tangible items."

'Don Said So'

Gerald Johnston recalls Tyson making an impression with the investment community when he was questioned about the opening of a $50 million processing plant in Pine Bluff.

The plant, which opened in 1991, largely was dedicated to producing chicken for KFC's Lite 'n' Crispy and Hot Wings lines.

An analyst asked Tyson how much money per pound the company expected to make from the plant's weekly processing capacity of more than 3 million pounds.

"Do you want me to be honest with you?" Tyson said.

"Sure," replied the analyst.

"I don't have the foggiest idea," Tyson said.

"Of course, the investment community loved that because they figured if he was honest about not knowing something, they could trust what he said," Johnston said.

He recalls fielding a call from an investment analyst asking for more supporting data to show how the company was going to achieve Don Tyson's goal of doubling sales every five years.

"How are you going to get there?" the analyst queried.

"There's not any numbers," Johnston said.

"What am I going to put in my report?"  the analyst asked.

"Just put 'Don said so,' and he did," Johnston said.

One day, Tyson wanted to literally boost the sense of ownership across the company's work force and visited with Johnston about it. His idea: "I want everyone who works for us to have at least five shares of stock."

Johnston asked him if he realized how much money it would cost to mail out all the additional annual reports and produce the extra paperwork.

"Yeah, Gerald, but if I can get everyone involved in the ownership, they will turn off the lights when they go home because it's their company, too," Tyson said. "My competition won't have a chance."

That stock gift was accomplished in 1989.

"Don had a down-to-earth style and an ability to feel comfortable around people from all walks of life and an ability to make others feel comfortable," Johnston said. "He made everyone around here feel important no matter what your job was. He was the kind of guy you didn't want to disappoint. You wanted to do a good job for him."

Womack remembers Tyson's drop-in visits with his executive staff.

"Don would come into your office unannounced, sit down and say 'Well?'" he said. "That's all he would say, and your mind would race as you tried to fill the awkward conversational void with whatever was happening in your part of the company.

"He would absorb what was going on. He walked around and managed. We had staff meetings, but he did a lot of management just walking around.

"He had a great sense of humor and a sharp mind. He had a clear way of reasoning and explaining things, of distilling information down to one page of what we were going to do and how it would work out."

Womack said Tyson enjoyed accompanying him on sales calls.

"He was good," he said. "Of course, his name was on the company. Don would endear himself to them. They loved him."

Buddy Wray declined to contribute any anecdotes when asked about Tyson's well-earned reputation for playing as hard as he worked.

"Oh, I have some more Don Tyson stories," Wray said with a laugh. "But I don't want to see them in print. I might've been part of them."

Who Controls Tyson Foods?

Tyson Foods Inc. has broadened its ownership in a massive way since its meager 100,000-share IPO that raised more than $1 million nearly 48 years ago.

Today, outstanding shares of its Class A stock total 307,124,999, worth more than $5.1 billion based on the recent closing price of $16.78.

But control of the corporation has always remained with the Tyson family. That status quo was further protected in 1986 when the company expanded its stock structure to include Class B shares as part of its reincorporation in Delaware.

Each Class B share vote equals 10 Class A share votes, and those controlling Class B shares are controlled by the Tyson family. Here's a breakdown of those Class B shares:

Tyson Limited Partnership holds a 69.8 percent voting control through 70 million shares of Class B stock.

Control of TLP is divided among its general partners, which hold a combined 1.257 percent stake in the limited partnership. The managing general partner of TLP was Don Tyson, chairman emeritus and former CEO.

After Tyson's death, the general partnership is divided among:

  • The Tyson Partnership Interest Trust, 44.44 percent. Trustees are Leland Tollett, retired chairman and CEO of Tyson Foods; Harry C. Erwin III, managing partner of the Little Rock accounting firm of Erwin & Co., which has done consulting and tax-related services for the Tyson family and Tyson Foods for many years; and Thomas B. Schueck, chairman and CEO of Lexicon Inc., a Little Rock steel fabrication, engineering and construction company.
  • The TPI Trust terminates Dec. 31, 2016. Upon termination of the TPI Trust, the general partnership interest held by the TPI Trust will transfer to the Donald J. Tyson Revocable Trust, whose trustees are Schueck, Erwin and John Tyson, chairman of the board and son of Don Tyson.
  • John Tyson, 33.33 percent.
  • Barbara Tyson, director and widow of Don Tyson's brother, Randal, 11.115 percent.
  • Harry C. Erwin III, 11.115 percent.

Remaining Tyson LP ownership is divided among:

  • Tyson 2009 Family Trust, 53.4881 percent. Don Tyson was the sole beneficiary.
  • Randal W. Tyson Testamentary Trust, the namesake trust of Tyson's late brother, 45.2549 percent. The sole income beneficiary is Randal Tyson's widow, Barbara Tyson, a director with the company. John Tyson is one of the contingent beneficiaries.

According to the Jan. 6 securities filing by Tyson Foods, Tyson LP terminates Dec. 31, 2040.



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