Tyson Foods 2005 Annual Report Download - page 49

>> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
TYSON FOODS, INC. 2005 ANNUAL REPORT
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Tyson Foods, Inc. >> 47
At October 1, 2005, the Company had outstanding approximately
nine million restricted shares of Class A stock with restrictions
expiring over periods through July 1, 2020. The unearned portion
of the restricted stock is classified on the Consolidated Balance
Sheets as unamortized deferred compensation in shareholders’
equity. Unearned compensation is amortized over the vesting
period for the particular grant using a straight-line method. The
Company issues restricted stock at the market value as of the date
of grant. The total number of shares of restricted stock issued
during fiscal years 2005, 2004 and 2003 were 2,049,629, 462,738
and 3,269,832, respectively. The weighted average fair value of
restricted stock granted was $16.68, $15.69 and $11.20 per share
during fiscal years 2005, 2004 and 2003, respectively.
DEFERRED COMPENSATION
>> 13
In July 2003, the Compensation Committee authorized the Company
to award performance-based shares of the Company’s Class A stock
to certain senior executive officers on the first business day of each
of the Company’s 2004, 2005 and 2006 fiscal years having an initial
maximum aggregate value of $4 million on the date of each award.
In August 2005 and September 2004, the Compensation Committee
authorized the expansion of the fiscal 2006 and fiscal 2005 awards
to include additional senior officers. The expansions increased
the initial maximum aggregate value by $3 million and $2 million
for the 2006 and 2005 grants, respectively. The vesting of the
performance-based shares for the 2004 and 2005 awards is over
three years, and the vesting of the 2006 award is over two and
one-half to three years (the Vesting Period), each award being
subject to the attainment of Company goals determined by the
Compensation Committee prior to the date of the award. The
Company reviews progress towards the attainment of Company
goals each quarter during the Vesting Period to determine the
appropriate adjustment to the deferred compensation liability for
the anticipated vesting of the shares. The attainment of Company
goals can be finally determined only at the end of the Vesting
Period. If the shares vest, the ultimate cost to the Company will be
equal to the Class A stock price on the date the shares vest times
the number of shares awarded.
PENSIONS AND OTHER
>> 14 POSTRETIREMENT BENEFITS
The Company has both funded and unfunded noncontributory
defined benefit pension plans covering specific groups of employees.
Two plans provide benefits based on a formula using years of service
and a specified benefit rate. Effective January 1, 2004, the Company
implemented a new defined benefit plan for certain contracted
officers that uses a formula based on years of service and final aver-
age salary. Additionally, one of the Company’s subsidiaries has a plan
which has been frozen, whereby no new participants will be added
and no future benefits will be earned. The Company also has other
postretirement benefit plans for which substantially all of its employ-
ees may receive benefits if they satisfy applicable eligibility criteria.
The postretirement healthcare plans are contributory with partici-
pants’ contributions adjusted when deemed necessary.
The Company has defined contribution retirement and incen-
tive benefit programs for various groups of Company personnel.
Company contributions totaled $56 million, $55 million and
$48 million in fiscal years 2005, 2004 and 2003, respectively.
The Company uses a September 30 measurement date for its defined
benefit plans and two postretirement medical plans and a July 31
measurement date for its remaining postretirement medical plans.
Other postretirement benefits include postretirement medical
costs and life insurance.
BENEFIT OBLIGATIONS AND FUNDED STATUS
The following table provides a reconciliation of the changes in the
plans’ benefit obligations, assets and funded status as of fiscal year
ends October 1, 2005, and October 2, 2004:
Other Postretirement
Pension Benefits Benefits
in millions 2005 2004 2005 2004
Change in benefit obligation
Benefit obligation
at beginning of year $ 77 $ 67 $ 66 $ 66
Service cost 63–1
Interest cost 6544
Plan participants’
contributions ––43
Addition of subsidiary plan 18 – – –
Amendments –9(9)–
Actuarial (gain)/loss 6(1)95
Benefits paid (6) (6) (14) (13)
Benefit obligation at
end of year 107 77 60 66
Change in plan assets
Fair value of plan assets
at beginning of year 59 50 – –
Actual return on plan assets 86––
Employer contributions 10 9 10 10
Plan participants’
contributions ––43
Addition of subsidiary plan 11 – – –
Benefits paid (6) (6) (14) (13)
Fair value of plan assets
at end of year 82 59 – –
Funded status (25) (18) (60) (66)
Amounts not yet recognized:
Unrecognized prior
service cost 7 8 (16) (9)
Unrecognized actuarial
loss 15 6 – –
Net amount recognized $ (3) $ (4) $(76) $(75)