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Monday, November 27, 2006 2:08 PM CST
ZAC LEHR • THE MORNING NEWS

Dick Bond, president and chief executive of Tyson Foods Inc., speaks with media in his office at the Tyson Foods headquarters in Springdale on Nov. 15. Bond came to Tyson Foods from IBP, a company Tyson Foods acquired in late 2001.
The Future Of Tyson

By Kim Souza

THE MORNING NEWS•KSOUZA@NWAONLINE.NET

Tyson Foods Inc. lost $196 million in fiscal 2006. The company continues to face multimillion-dollar problems with once-lucrative beef export markets as well as oversupplies in poultry. To top it off, rising feed prices threaten already tight margins across all three of the company’s protein sectors.

Welcome to a glimpse into the daily business world of Tyson Foods Chief Executive Officer Dick Bond.

Bond was given command of Springdale-based Tyson Foods earlier this year, as economic challenges — beyond much of the company’s control — plagued the meat industry.

The May move by the Tyson Foods board of directors to place Bond in charge of the company was hailed by industry watchers as a good move.

His resume and almost 40 years’ experience are respected in the industry, said Farha Aslam, analyst for Stephens Inc., who conducts investment advisory services for Tyson Foods.

“Dick Bond is clearly recognized among his peers as an industry leader. He has a proven track record as a business manager in a very tough business, meat packing and poultry processing,” said J. Patrick Boyle, president and CEO of the American Meat Institute in Washington.

Cutting Costs

In a recent interview, Bond talked about the experiences that brought him to Springdale and what he must do to secure the future of the $25 billion company he now runs.

Bond was named chief executive officer by the company’s directors May 19, which put him in charge of Tyson Foods’ day-to-day operations. The company had just lost a record $127 million in the second quarter, its worst showing in more than a decade. The losses were blamed on bird flu fears and mad cow concerns, which led to a protein oversupply and declining prices.

Wall Street analysts applauded the management move then and continue to endorse Bond’s efforts.

David Nelson of Credit Suisse said, “Dick is one in a handful of people in the world who knows how to run a fresh meats business. He personifies good management.”

The disciplined Bond wasted no time. Within one week of taking the helm, Bond proposed spending cuts of $110 million from the company’s 2007 fiscal budget. The primary initiative Bond set out to tackle was getting Tyson Foods’ spending in line.

By mid-July, Bond and employees had exceeded the $110 million goal and found a way to trim $200 million from the company’s 2007 expenses.

Adding Value

“For Dick, it is all about getting the company back in an advantaged position,” said John McMillin, industry analyst for Prudential Equity Corp. of New York. “I have known Dick Bond for over 10 years, back to when he was the No. 2 man at IBP Inc. He is a pragmatic leader who, like a football coach, gets his employees to play hard for him.”

Streamlining operations began immediately, and Tyson Foods eliminated 420 management and support jobs, and it consolidated beef-packing facilities to increase capacity in its existing beef plants.

The company cut beef and chicken production levels when they weren’t profitable, and continues to focus on moving products up the supply chain. Adding value to products — selling easy-to-fix chicken meals instead of just basic chicken in a package — generates more revenue per dollar of production.

Value-added margins typically run two to 21/2 times that of pure commodity rates, Bond said.

Bond said the face of Tyson Foods is changing. While adhering to its basic culture and core values, the new Tyson Foods not only will return to profitability but also will raise the bar for innovation in the food-processing industry.

Moving products up the value chain is an essential part of Tyson Foods’ strategy in growing its revenue. Bond said a new plan was just revealed that will help Tyson Foods turn protein fat into biofuel.

A new department, Tyson Renewable Energy, is examining the prospects of using its 2.3 billion pounds of protein fat each year to produce 300 million gallons, or 20,000 barrels a day, of biofuel.

The company outlined its plan recently to investors, and Bond said he is excited about the potential, not only environmentally but also economically, for Tyson Foods’ bottom line.

“It won’t impact earnings in 2007, but it’s not too far away,” he said.

Hands On

Bond learned the protein business from inside the beef rendering plant he ran in Roswell, N.M., as a 30-year-old with a business and finance background.

“I spent many nights at midnight out in the rendering plant where you have all the byproducts, and things weren’t running right. I had to try to figure out why and then try to fix the problem. It was both a great challenge and an opportunity to learn,” Bond said.

Bond said a good leader is able to focus on a small number of goals at a time. He said focus, open-mindedness and agility with regard to listening to change are paramount attributes for good leaders.

He worked in sales and marketing, was responsible for cattle buying and pricing and even helped broker a deal with lenders to refinance the company. Bond said he spent long hours learning the business at the small regional packer before going to work for IBP in 1980.

Bond climbed the ladder at IBP, becoming president in 1995 and chief operating officer in 1997.

“I was in charge of the beef and prepared foods division. The Food Brands division of IBP, a prepared food sector, is now the basis for Tyson’s prepared foods segment,” Bond said.

With Tyson’s acquisition of IBP in 2001, Bond ran the fresh meats division and eventually became president of Tyson Foods in 2003.

Bond said his exposure to so many different jobs in his early career with El Paso Mexican Foods and the regional beef packer helped him learn a difficult business.

Family Bonds

Bond admitted he has spent a great deal of time at work in his 37-year career, maybe to the detriment of his family at times. But he delighted in sharing the fact that he and his wife, Bettie, have six children, four of whom live in the area and continue to have dinner at his home each Sunday.

Bond said his children — four girls and two boys ranging in age from 35 to 23 — have finished college, with the exception of the youngest daughter, who is just completing a graduate degree at Sarah Lawrence College in Bronxville, N.Y.

“We do love it here, and this is home,” Bond said of Northwest Arkansas.

Outside Work

Earlier this year, Bond was elected chairman of the board for the American Meat Institute.

Boyle said Bond will help the institute lobby upcoming federal legislation, such as the 2007 Farm Bill and immigration reform.

Bond said the issue of high corn prices would be perhaps the biggest concern of the food industry in the coming months.

“It will either be corn for food or corn for fuel, and we will certainly do everything in our power to have our voices heard in the upcoming Farm Bill,” Bond said.

Higher food prices are inevitable for consumers because there isn’t enough margin in the profit to compensate for the higher prices in both corn and soybean meal, he said.

Corn prices have risen 55 percent during the last two months and recently reached 10-year highs. The price increase is due to demand from ethanol plants that are springing up to produce vehicle fuels.

“The effect on Tyson Foods is actually less than other protein producers. Because of our high value-added product mix, the grain component of our revenue line is a lot less than for someone in the pure commodity business,” Bond said.

Looking Ahead

In fiscal 2007, which began Oct. 1, Bond said the company will make money. A sluggish second quarter is expected, but he is forecasting a strong second half of the year.

Analysts agree Bond’s efforts to harness company spending has and will continue to pay dividends for the world’s largest meat producer.

The management team under Bond’s leadership has done a respectable job of controlling costs internally, despite volatile market conditions, and Tyson will emerge stronger, Nelson said in a recent research note.

Bond, 59, agreed to stay on as CEO for Tyson Foods until 2009, but didn’t offer any hint as to what he might do thereafter.

“Since taking over as CEO, Dick Bond has put in place a strategy designed to leverage Tyson’s scale, drive demand, improve pricing and streamline the supply chain. It is clear that Tyson is a more focused organization with clear strategic objectives and is driven to deliver results,” Aslam said.