Tyson Foods 2004 Annual Report Download - page 35

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE ONE : BUSINESS AND SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Tyson Foods, Inc. (collectively, “the Company”
or “Tyson”), founded in 1935 with world headquarters in Springdale,
Arkansas, is the world’s largest processor and marketer of chicken, beef
and pork and the second largest food company in the Fortune 500.
Tyson produces a wide variety of brand name protein-based and
prepared food products marketed in the United States and more than
80 countries around the world. Tyson is the recognized market leader
in the retail and foodservice markets it serves. The Company has
approximately 114,000 team members and more than 300 facilities
and offices in 27 states and 20 countries.
The consolidated financial statements include the
accounts of all majority-owned and wholly-owned subsidiaries.
All significant intercompany accounts and transactions have been
eliminated in consolidation.
The Company utilizes a 52- or 53-week accounting period
that ends on the Saturday closest to September 30. The Company’s
accounting cycle resulted in a 53-week year for fiscal year 2004, and
a 52-week year for fiscal years 2003 and 2002.
Certain reclassifications have been made to prior
periods to conform to current presentations.
Cash equivalents consist of investments
in short-term, highly liquid securities having original maturities of
three months or less, which are made as part of the Company’s cash
management activity. The carrying values of these assets approxi-
mate their fair market values. The Company primarily utilizes a cash
management system with a series of separate accounts consisting
of lockbox accounts for receiving cash, concentration accounts that
funds are moved to, and several “zero-balance” disbursement accounts
for funding of payroll, accounts payable and grower payments. As a
result of the Company’s cash management system, checks issued,
but not presented to the banks for payment, may create negative
book cash balances. Checks outstanding in excess of related book
cash balances totaling approximately $359 million at October 2, 2004,
and $313 million at September 27, 2003, are included in trade accounts
payable and accrued salaries, wages and benefits.
The Company records trade accounts receivable
at net realizable value. This value includes an appropriate allowance
for estimated uncollectible accounts to reflect any loss anticipated
on the trade accounts receivable balances and charged to the provi-
sion for doubtful accounts. The Company calculates this allowance
based on a history of write-offs, level of past due accounts and
relationships with and economic status of the customers.
Processed products, livestock (excluding breeders)
and supplies and other are valued at the lower of cost (first-in,
first-out) or market. Livestock includes live cattle, live chicken and
live swine. Cost includes purchased raw materials, live purchase
costs, growout costs (primarily feed, contract grower pay and catch
and haul costs), labor and manufacturing and production overhead,
which are related to the purchase and production of inventories.
Live chicken consists of broilers and breeders. Breeders are stated
as cost less amortization. The costs associated with breeders,
including breeder chicks, feed and medicine, are accumulated up
to the production stage and amortized to broiler inventory over
the productive life of the flock using a standard unit of production.
Total inventory consists of:
in millions 2004 2003
Processed products $1,197 $1,167
Livestock 545 532
Supplies and other 321 295
Total inventory $2,063 $1,994
Depreciation is provided primarily by the
straight-line method using estimated lives for buildings
and leasehold improvements of 10 to 39 years, machinery and
equipment of three to 12 years and other of three to 20 years.
The Company reviews the carrying value of
long-lived assets at each balance sheet date if indication of impairment
exists. Recoverability is assessed using undiscounted cash flows based
upon historical results and current projections of earnings before
interest and taxes. The Company measures impairment using discounted
cash flows of future operating results based upon a discount rate
that corresponds to the Company’s cost of capital. Impairments are
recognized in operating results to the extent that carrying value
exceeds discounted cash flows of future operations.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS