Tyson Foods 2005 Annual Report Download - page 46

>> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
TYSON FOODS, INC. 2005 ANNUAL REPORT
Tyson Foods, Inc. >> 44
FAIR VALUES OF FINANCIAL INSTRUMENTS:
Asset (Liability)
in millions 2005 2004
Commodity derivative positions $ (7) $ 5
Interest-rate derivative positions (1) (1)
Total debt (3,232) (3,700)
Fair values are based on quoted market prices or published
forward interest rate and natural gas curves. Carrying values for
derivative positions equal the fair values as of October 1, 2005,
and October 2, 2004, and the carrying values of total debt was
$3.0 billion and $3.4 billion, respectively. All other financial instru-
ments’ fair values approximate recorded values at October 1, 2005,
and October 2, 2004.
Concentrations of Credit Risk: The Company’s financial instruments
that are exposed to concentrations of credit risk consist primarily
of cash equivalents and trade receivables. The Company’s cash
equivalents are in high quality securities placed with major banks
and financial institutions. Concentrations of credit risk with respect
to receivables are limited due to the large number of customers
and their dispersion across geographic areas. The Company performs
periodic credit evaluations of its customers’ financial condition
and generally does not require collateral. At October 1, 2005, and
October 2, 2004, approximately 13.0% and 15.0%, respectively, of
the Company’s net accounts receivable balance was due from one
customer. No other single customer or customer group represents
greater than 10% of net accounts receivable.
PROPERTY, PLANT AND EQUIPMENT
>> 07
The major categories of property, plant and equipment and
accumulated depreciation at cost, at October 1, 2005, and
October 2, 2004, are as follows:
in millions 2005 2004
Land $ 113 $ 111
Building and leasehold improvements 2,339 2,307
Machinery and equipment 4,015 3,981
Land improvements and other 195 194
Buildings and equipment under construction 407 218
7,069 6,811
Less accumulated depreciation 3,062 2,847
Net property, plant and equipment $4,007 $3,964
The Company’s total depreciation expense was $465 million,
$458 million and $427 million in fiscal years 2005, 2004 and 2003,
respectively. The Company capitalized interest costs of $6 million
in fiscal 2005 and $3 million in both fiscal years 2004 and 2003, as
part of the cost of major asset construction projects. Approximately
$521 million will be required to complete construction projects in
progress at October 1, 2005.
OTHER CURRENT LIABILITIES
>> 08
Other current liabilities at October 1, 2005, and October 2, 2004,
include:
in millions 2005 2004
Accrued salaries, wages and benefits $ 269 $ 270
Self-insurance reserves 252 248
Income taxes payable 183 149
Other 366 343
Total other current liabilities $1,070 $1,010
COMMITMENTS
>> 09
The Company leases equipment, properties and certain farms
for which the total rentals thereon approximated $116 million in
fiscal 2005, $111 million in fiscal 2004 and $104 million in fiscal 2003.
Most leases have terms ranging from one to seven years with vary-
ing renewal periods. The most significant obligations assumed
under the terms of the leases are the upkeep of the facilities
and payments of insurance and property taxes.
Minimum lease commitments under non-cancelable leases at
October 1, 2005, totaled $187 million composed of $82 million for
fiscal 2006, $48 million for fiscal 2007, $30 million for fiscal 2008,
$16 million for fiscal 2009, $5 million for fiscal 2010 and $6 million
for later years.
The Company guarantees debt of outside third parties, which involve
a lease and grower loans, all of which are substantially collateral-
ized by the underlying assets. Terms of the underlying debt range from
three to 10 years and the maximum potential amount of future pay-
ments as of October 1, 2005, was $87 million. The Company also
maintains operating leases for various types of equipment, some
of which contain residual value guarantees for the market value of
assets at the end of the term of the lease. The terms of the lease
maturities range from one to seven years. The maximum potential
amount of the residual value guarantees is approximately $106 mil-
lion, of which approximately $22 million would be recoverable