Tyson Foods 2005 Annual Report Download - page 51

>> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
TYSON FOODS, INC. 2005 ANNUAL REPORT
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Tyson Foods, Inc. >> 49
The Company has four postretirement health plans. Two of these
consist of fixed, annual payments by the Company and account
for $39 million of the Company’s postretirement obligation at
October 1, 2005. A healthcare cost trend is not required to deter-
mine this obligation. The remaining two plans, Pre-Medicare and
Post Medicare, account for $21 million of the Company’s post-
retirement medical obligation at year end. The Pre-Medicare plan
covers retirees who do not yet qualify for Medicare and uses a
healthcare cost trend of 11% in the current year, grading down to
6% in fiscal 2011. The Post Medicare plan provides secondary cover-
age to retirees covered under Medicare and has a healthcare cost
trend of 8% that grades down to 5% in fiscal 2009. Assumed health-
care cost trend rates would have the following effects:
One-Percentage- One-Percentage-
in millions Point Increase Point Decrease
Effect on total of service and interest cost $1 $1
Effect on postretirement benefit obligation 27 22
PLAN ASSETS
The fair value of plan assets for the Company’s domestic union
pension benefit plans was $70 million and $59 million as of
October 1, 2005, and October 2, 2004, respectively. The following
table sets forth the actual and target asset allocation for the
Company’s pension plan assets:
Target Asset
2005 2004 Allocation
Cash 0.7% 0.8% 0.0%
Fixed income securities 24.6 24.7 25.0
US Stock Funds—Large- and Mid-Cap 49.7 49.6 50.0
US Stock Funds—Small-Cap 10.0 10.0 10.0
International Stock Funds 15.0 14.9 15.0
Total 100.0% 100.0% 100.0%
During fiscal 2005, the Company recorded the assets and benefit
obligation related to a foreign subsidiary. This pension plan had
$12 million in plan assets at October 1, 2005. All of this plan’s
assets are held in annuity contracts consistent with its target
asset allocation.
The Plan Trustees have established a set of investment objectives
related to the assets of the pension plans and regularly monitor the
performance of the funds and portfolio managers. Objectives for
the pension assets are (1) to provide growth of capital and income,
(2) to achieve a target weighted average annual rate of return that is
competitive with other funds with similar investment objectives
and (3) to diversify in order to reduce risk. The investment objec-
tives and target asset allocation were updated in January 2004.
CONTRIBUTIONS
The Company’s policy is to fund at least the minimum contribution
required to meet applicable federal employee benefit and local tax
laws. In its sole discretion, the Company may from time to time
fund additional amounts. Expected contributions to the Company’s
pension plans for fiscal 2006 are approximately $10 million. For the
fiscal years 2005, 2004 and 2003, the Company funded $10 million,
$9 million and $4 million, respectively, to its defined benefit plans.
ESTIMATED FUTURE BENEFIT PAYMENTS
The following benefit payments are expected to be paid:
Other
Pension Postretirement
in millions Benefits Benefits
2006 $ 6 $11
2007 712
2008 712
2009 813
2010 814
2011–2015 55 77
SUPPLEMENTAL CASH FLOW INFORMATION
>> 15
The following non-cash transactions were excluded from the
Consolidated Statements of Cash Flows for fiscal 2005. Adjust-
ments of $53 million were made to remove pre-acquisition tax
liability accruals no longer necessary due to the closing of an
IRS examination and the evaluation of certain pre-acquisition
deferred tax liabilities. The adjustments include $46 million
and $7 million of adjustments to pre-acquisition deferred tax
assets and liabilities related to the acquisitions in previous years
of Tyson Fresh Meats, Inc. (TFM; formerly known as IBP, inc.) and
Hudson Foods, Inc., respectively.
In fiscal 2004, a similar non-cash transaction was excluded from
the Consolidated Statements of Cash Flows for fiscal 2004. The
$91 million change in goodwill in fiscal 2004 from the September 27,
2003, balance and a corresponding change in other current liabili-
ties was due to an adjustment of pre-acquisition tax liabilities