Tyson Foods 2000 Annual Report Download - page 36

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TYSON FOODS, INC. 2000 ANNUAL REPORT If impairment is indicated by using undiscounted cash flows, the Company measures impairment using discounted cash flows of future operating results based upon a rate that corresponds to the Company’s cost of capital. Impairments are recognized in operating results to the extent that carry- ing value exceeds fair value. At September 30, 2000, and October 2, 1999, the accumulated amortization of excess of investments over net assets acquired was $256 million and $225 million, respectively. Other Current Liabilities: Insurance reserves totaling $102 mil- lion and $95 million at September 30, 2000, and October 2, 1999, respectively, are included in other current liabilities. Capital Stock: Holders of Class B common stock (Class B
stock) may convert such stock into Class A common stock (Class A stock) on a share-for-share basis. Holders of Class B stock are entitled to 10 votes per share while holders of Class A stock are entitled to one vote per share on matters submitted to shareholders for approval. Cash dividends cannot be paid to holders of Class B stock unless they are simultaneously paid to holders of Class A stock. The per share amount of the cash dividend paid to holders of Class B stock cannot exceed 90% of the cash dividend simultaneously paid to holders of Class A stock. The Company pays quar- terly cash dividends to Class A and Class B shareholders. The Company paid Class A dividends per share of $0.16, $0.115 and $0.10 and Class B dividends per share of $0.144, $0.104 and $0.09 in 2000, 1999 and 1998, respectively. Stock-Based Compensation: Stock-based compensation is recog-
nized using the intrinsic value method. For disclosure purposes, pro forma net income and earnings per share impacts are provided as if the fair value method had been applied. Financial Instruments: Periodically, the Company uses deriva- tive financial instruments to reduce its exposure to various market risks. The Company does not regularly engage in speculative transactions, nor does the Company regularly hold or issue financial instruments for trading purposes. Generally, contract terms of a hedge instrument closely
mirror those of the hedged item providing a high degree of risk reduction and correlation. Contracts that effectively meet the risk reduction and correlation criteria are recorded using hedge accounting. Financial instruments that do not meet the criteria for hedge accounting are marked to fair value with gains or losses reported currently in earnings. Interest rate swaps are used to hedge exposure to changes in interest rates under various leveraged equipment loans. Settlements of interest rate swaps are accounted for as an adjustment to interest expense. Commodity futures and options are used to hedge a portion of the Company’s purchases of certain commodities for future processing requirements. Such contracts are accounted for as hedges, with gains and losses recognized as part of cost of sales, and generally have terms of less than 15 months. Foreign currency forwards and option contracts are used to hedge sale and debt transactions denominated in foreign currencies to reduce the currency risk associated with fluctuating exchange rates. Such contracts generally have terms of less than 12 months. Unrealized gains and losses are deferred as part of the basis of the underlying transaction. Revenue Recognition: The Company recognizes sales revenue
upon shipment of product. Certain international sales revenue and live swine sales revenue are recognized after transfer of title or delivery of product, which may occur after shipment. Advertising and Promotion Expenses: Advertising and promotion expenses are charged to operations in the period incurred. Advertising and promotion expenses for 2000, 1999 and 1998 were $280 million, $301 million and $294 million, respectively. Use of Estimates: The consolidated financial statements are
prepared in conformity with accounting principles generally accepted in the United States which require management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accom- panying notes. Actual results could differ from those estimates.
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