Tyson Foods 2005 Annual Report Download - page 47

>> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
TYSON FOODS, INC. 2005 ANNUAL REPORT
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Tyson Foods, Inc. >> 45
through various recourse provisions and an undeterminable recov-
erable amount based on the fair market value of the underlying
leased assets. The likelihood of payments under these guarantees is
not considered probable. At October 1, 2005, and October 2, 2004,
no liabilities for guarantees were recorded.
Additionally, the Company also enters into future purchase
commitments for various items such as corn, soybeans, livestock
and natural gas contracts. At October 1, 2005, these commitments
totaled $338 million, composed of $313 million for fiscal 2006,
$15 million for fiscal 2007, $2 million for fiscal 2008, $2 million for
fiscal 2009, $2 million for fiscal 2010 and $4 million for later years.
LONG-TERM DEBT
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The Company has an unsecured revolving credit facility totaling
$1.0 billion that support the Company’s commercial paper program,
letters of credit and other short-term funding needs. During the
fourth quarter of fiscal 2005, the Company restructured its revolving
credit facilities into one facility, which now consists of $1.0 billion
that expires in September 2010. At October 1, 2005, the Company had
outstanding letters of credit totaling approximately $254 million
issued primarily in support of workers’ compensation insurance
programs and derivative activities. There were no draw downs
under these letters of credit at October 1, 2005. At October 1, 2005,
and October 2, 2004, there were no amounts drawn under the
revolving credit facilities; however, the outstanding letters of credit
reduce the amount available under the revolving credit facilities.
The Company has a receivables purchase agreement with three
co-purchasers to sell up to $750 million of trade receivables.
These agreements were restructured and extended in the fourth
quarter of fiscal 2005 and now consist of $375 million expiring in
August 2006, and $375 million expiring in August 2008. The receiv-
ables purchase agreement has been accounted for as a borrowing
and has an interest rate based on commercial paper issued by the
co-purchasers. Under this agreement, substantially all of the
Company’s accounts receivable are sold to a special purpose
entity, Tyson Receivables Corporation (TRC), which is a wholly-
owned consolidated subsidiary of the Company. TRC has its own
separate creditors that are entitled to be satisfied out of all of
the assets of TRC prior to any value becoming available to the
Company as TRC’s equity holder. At October 1, 2005, there were
no amounts drawn under the receivables purchase agreement
while at October 2, 2004, there was $150 million outstanding under
the receivables purchase agreement expiring in August 2005 and
$150 million under the agreement expiring in August 2007.
In September 2005, Lakeside Farm Industries, Ltd. (Lakeside) borrowed
$353 million in U.S. dollars under a new unsecured three-year term
agreement with the principal balance being due at the end of
the term. The agreement provides for interest rates ranging from
LIBOR plus 0.4 percent to LIBOR plus one percent depending on
the Company’s debt rating. Interest payments are made at least
quarterly. Lakeside is a wholly-owned subsidiary of the Company.
Under the terms of the leveraged equipment loans, the Company
had cash deposits totaling approximately $52 million and $57 million,
which was included on the Consolidated Balance Sheets in other
assets at October 1, 2005 and October 2, 2004. Under these lever-
aged loan agreements, the Company entered into interest rate
swap agreements to effectively lock in a fixed interest rate for
these borrowings.
Annual maturities of long-term debt for the five fiscal years
subsequent to October 1, 2005, are: 2006 – $126 million;
2007 – $898 million; 2008 – $14 million; 2009 – $358 million;
2010 – $237 million.
The revolving credit facility, senior notes, notes and accounts
receivable securitization contain various covenants, the more
restrictive of which contain a maximum allowed leverage ratio
and a minimum required interest coverage ratio. The Company
was in compliance with all of such covenants at fiscal year end.
Long-term debt consists of the following:
in millions Maturity 2005 2004
Commercial paper
(2.05% effective rate at 10/2/04) Various $–$86
Revolving Credit Facilities 2010 ––
Senior notes and Notes (rates ranging
from 6.13% to 8.25%) 2006–2028 2,529 2,816
Term Loan (4.44% effective rate
at 10/1/05) 2008 345 –
Accounts Receivable Securitization
(2.51% effective rate at 10/2/04) 2006, 2008 – 300
Institutional notes
(10.84% effective rate at 10/1/05
and 10/2/04) 2006 10 20
Leveraged equipment loans (rates
ranging from 4.67% to 5.99%) 2006–2009 64 85
Other Various 47 55
Total debt 2,995 3,362
Less current debt 126 338
Total long-term debt $2,869 $3,024
The Company has fully and unconditionally guaranteed
$476 million of senior notes issued by Tyson Fresh Meats, Inc.
(TFM; formerly known as IBP, inc.), a wholly-owned subsidiary of
the Company. Additionally, the Company has fully and uncondi-
tionally guaranteed $345 million related to a term loan facility
borrowed by Lakeside.