Tyson Foods 2001 Annual Report Download - page 40

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TYSON FOODS, INC. 2001 ANNUAL REPORT
In October 2001, the FASB issued SFAS No. 144, “ Accounting
for the Impairment or Disposal of Long-Lived Assets” (SFAS 144).
SFAS 144 supersedes SFAS No. 121, “Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of;” however, it retains the fundamental provisions of that
Statement related to the recognition and measurement of the
impairment of long-lived assets to be “held and used.” In addi-
tion, the Statement provides more guidance on estimating cash
flows when performing a recoverability test, requires that a
long-lived asset to be disposed of other than by sale (e.g., aban-
doned) be classified as “held and used” until it is disposed of,
and establishes more restrictive criteria to classify an asset as
“held for sale.” The Company is required to adopt SFAS 144 in
fiscal year 2003.
NOTE 2: ACQUISITIONS
In August 2001, the Company acquired 50.1% of IBP by paying
approximately $1.7 billion in cash representing $30 per share
for approximately 54 million shares of IBP’s common shares.
In September 2001, the Company issued approximately 129 mil-
lion shares of Class A stock, with a fair value of approximately
$1.2 billion, to acquire the remaining IBP shares, and assumed
approximately $1.7 billion of IBP debt to complete the acquisi-
tion. The IBP shares were converted into Class A stock using an
exchange ratio of 2.381. The total acquisition cost of approxi-
mately $4.6 billion was accounted for as a purchase with a
portion of the total purchase price allocated to assets acquired
and liabilities assumed based on estimated fair market value at
the date of acquisition.
IBP is the world’s largest manufacturer of fresh meats and
frozen and refrigerated food products, with 2000 annual sales of
approximately $17 billion. The acquisition of IBP will allow the
Company to expand its business to include the processing and
marketing of beef and pork products.
The transaction is being accounted for using the purchase
method of accounting required by SFAS 141. Goodwill and iden-
tifiable intangible assets recorded in the acquisition will be tested
periodically for impairment as required by SFAS 142. The alloca-
tion of the purchase price to specific assets and liabilities is based,
in part, upon an outside appraisal of IBP’s long-lived assets. The
allocation of the purchase price has been completed.
Fair value of assets acquired and liabilities assumed at
August 3, 2001:
in millions
Cash and cash equivalents
$37
Accounts receivable 641
Inventories 937
Other current assets 112
Property, plant and equipment 1,968
Goodwill 1,830
Other assets 247
Total Assets $5,772
Accounts payable and accruals $ 836
Other liabilities 227
Long-term debt 1,651
Deferred income taxes 221
Shareholders’ equity 2,837
Total Liabilities and Shareholders’ Equity $5,772
Identifiable intangible assets of $242 million consist of trade-
marks of $138 million (included in goodwill), patents of $87 million
and $17 million of supply contracts (both of which are included
in other assets). The amounts associated with trademarks are
not subject to amortization as management believes their useful
lives to be indefinite. The amounts associated with patents and
supply contracts are being amortized over 15 and five years,
respectively.
In August 2001, the Company completed the financing for
the acquisition of IBP by entering into two bridge revolving credit
facilities consisting of a senior unsecured bridge credit agreement
which provided for aggregate borrowings up to $2.5 billion
(the Bridge Facility) and a senior unsecured receivables bridge
credit agreement which provided for aggregate borrowings up to
$350 million (the Receivables Bridge Facility). Subsequent to
September 29, 2001, the Company refinanced both facilities.