Tyson Foods 2004 Annual Report Download - page 56

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table summarizes cash payments for interest and
income taxes:
in millions 2004 2003 2002
Interest $316 $269 $208
Income taxes, net of refunds 244 36 90
Cash payments for interest in fiscal year 2004 increased, despite
lower debt levels, due to the timing of interest payments made
related to the senior notes caused by fiscal 2004 ending in October
rather than September. The increase in income taxes paid from
2003 to 2004 is due primarily to a refund received in fiscal 2003.
NOTE SEVENTEEN : TRANSACTIONS WITH RELATED PARTIES
The Company has operating leases for farms, equipment and other
facilities with Don Tyson, a director of the Company, certain members
of his family and the Randal W. Tyson Testamentary Trust. Total
payments of $8 million in 2004 and 2003, and $9 million in 2002,
were paid to entities in which these parties had an ownership inter-
est. Additionally, other facilities have been leased from other officers
and directors. Rentals paid to entities in which these parties had
an ownership interest totaled $1 million in 2004 and $2 million in
2003 and 2002.
A former director who resigned from the Board of Directors during
2003 received, from the sale of cattle to a subsidiary of the Company,
$10 million in fiscal years 2003 and 2002.
Certain officers and directors were engaged in chicken and swine
growout operations with the Company whereby these individuals
purchased animals, feed, housing and other items to raise the animals
to market weight. The total value of these transactions, which were
discontinued during fiscal 2003, amounted to $11 million in each fiscal
year of 2003 and 2002.
On May 21, 2004, the Company purchased a parcel of land adjacent
to the Company’s Corporate Center for approximately $356,000
from JHT, LLC, a limited liability company of which Don Tyson, a
director of the Company, and the Randal W. Tyson Testamentary
Trust are members. The purchase was approved by the Governance
Committee of the Board of Directors on April 29, 2004, and the land
is to be used for construction of facilities that will house expanded
product development kitchens, a new pilot production plant, provide
space for the consumer insights group and make provisions for
team member development activities.
In the second quarter of fiscal 2004, the Company purchased
1,028,577 shares of Class A stock in a private transaction with
Don Tyson, a director and managing partner of the Tyson Limited
Partnership, a principal shareholder of the Company. The purchase of
those shares from Mr. Tyson, which was approved by the Governance
Committee of the Board of Directors on January 29, 2004, was based
on the closing price of the Class A stock on the New York Stock
Exchange on the date of such approval.
During fiscal 2004, the Company received cash payments from
Don Tyson, a director of the Company, totaling approximately
$1.5 million, as reimbursement for certain perquisites and personal
benefits received during fiscal years 1997 through 2003.
NOTE EIGHTEEN : INCOME TAXES
Detail of the provision for income taxes consists of:
in millions 2004 2003 2002
Federal $183 $156 $173
State 12 10 17
Foreign 37 20 20
$232 $186 $210
Current $224 $ 73 $188
Deferred 8113 22
$232 $186 $210
The reasons for the difference between the effective income tax
rate and the statutory U.S. federal income tax rate are as follows:
2004 2003 2002
U.S. federal income tax rate 35.0% 35.0% 35.0%
State income taxes 1.8 2.2 3.0
Extraterritorial income exclusion (0.5) (1.9) (1.4)
Other 0.3 0.2 (1.1)
36.6% 35.5% 35.5%
During the fourth quarter of fiscal 2004, the Company adjusted
the tax rates used to record deferred taxes at one of its Mexican
subsidiaries resulting in a reduction of deferred tax liabilities of
$16 million. This adjustment is included in “Other” in the above table
for fiscal 2004. Other items included in “Other” are miscellaneous
nondeductible expenses, general business credits and amounts
relating to on-going examinations by taxing authorities.
Deferred income taxes are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax basis.
Deferred tax assets and liabilities are measured using tax rates
expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.