Tyson Foods 2003 Annual Report Download - page 41

Tyson Foods, Inc. 39
notes to consolidated financial statements
TYSON FOODS, INC. 2003 ANNUAL REPORT
a $74 million purchase option to acquire assets leased
from a third party which the Company had subleased to
Choctaw. Pro forma operating results reflecting the acqui-
sition of Choctaw would not be materially different from
the Company’s actual results of operations.
In May 2002, the Company acquired the assets of Millard
Processing Services, a bacon processing operation, for
approximately $73 million in cash. The acquisition has
been accounted for as a purchase and goodwill of
approximately $14 million has been recorded.
In August 2001, the Company acquired 50.1% of IBP by
paying approximately $1.7 billion in cash. In September
2001, the Company issued approximately 129 million
shares of Class A stock, with a fair value of approxi-
mately $1.2 billion, to acquire the remaining IBP shares,
and assumed approximately $1.7 billion of IBP debt. The
total acquisition cost of approximately $4.6 billion was
accounted for as a purchase in accordance with SFAS
No. 141 “Business Combinations.” Accordingly, the
tangible and identifiable intangible assets and liabilities
have been adjusted to fair values with the remainder of
the purchase price recorded as goodwill. The allocation
of the purchase price has been completed.
note 3:
disposition
In September 2002, the Company completed the sale of
its Specialty Brands, Inc. subsidiary. The subsidiary had
been acquired with the IBP acquisition, and its results of
operations were included in the Company’s Prepared
Foods segment. The Company received cash proceeds of
approximately $131 million, which were used to reduce
indebtedness, and recognized a pretax gain of $22 million,
which is included in other income on the consolidated
statement of income of fiscal 2002.
note 4:
other charges
In April 2003, the Company announced its decision to
close its Berlin, Maryland, poultry operation as part of its
ongoing plant rationalization efforts. The Berlin poultry
operation employed approximately 650 people and
included a hatchery, a feed mill, live production and a
4
3
processing facility. The facility ceased processing chick-
ens November 12, 2003. As a result of this decision, the
Company is anticipating total costs of $29 million that
include $14 million of costs related to closing the plant
and $15 million of estimated impairment charges for
assets to be disposed of. The costs related to closing the
plant include $9 million for estimated liabilities for the
resolution of the Company’s obligations under 209
grower contracts, and $5 million of other related costs
associated with the closing of the plant including plant
clean-up costs and employee termination benefits. The
Company is accounting for the closing of the Berlin oper-
ations in accordance with SFAS No. 146, “Accounting
for Costs Associated with Exit or Disposal Activities.” In
fiscal 2003, the Company recorded accruals of $25 million
($19 million in the third quarter and $6 million in the
fourth quarter) that included $10 million of costs related
to closing the plant and $15 million of estimated impair-
ment charges for assets to be disposed. This amount is
reflected in the Chicken segment as a reduction of oper-
ating income and included in the consolidated statements
of income in other charges. The costs related to closing
the plant that have been accrued as of September 27,
2003, include $7 million for estimated liabilities for the
resolution of the Company’s obligations under grower
contracts and $3 million of other related costs associated
with the closing of the plant, including plant clean-up costs
and employee termination benefits. At September 27,
2003, the accrual balance was $16 million, as $4 million
of obligations under grower contracts and $3 million of
other closing costs had been paid, and losses related to
the disposal of assets of $2 million were realized. The
Company anticipates recording additional costs of
approximately $4 million in the first quarter of fiscal
2004 related to closing the plant.
In the first quarter of fiscal 2003, the Company recorded
a $47 million accrual of costs related to the closing of its
Stilwell, Oklahoma, and Jacksonville, Florida, plants that
includes $26 million of costs related to closing the plants
and $21 million of estimated impairment charges for
assets to be disposed. The costs related to closing the
plants include $17 million for estimated liabilities for the
resolution of the Company’s obligations under grower
contracts, and $9 million of other related costs associated
with the closing of the plants including plant clean-up
costs and employee termination benefits.