Tyson Foods 2006 Annual Report Download - page 33

NOTE 3OTHER CHARGES
In July 2006, the Company announced its decision to implement
approximately $200 million in cost reductions as part of a strategy
to return to profitability. The cost reductions include staffing costs,
consulting and professional fees, sales and marketing costs and other
expenses. Virtually all of the cost reduction initiatives are expected
to be completed by December 2006, with savings beginning princi-
pally in fiscal 2007. In fiscal 2006, the Company recorded charges
of approximately $9 million for employee termination benefits
resulting from the termination of approximately 400 employees.
Of these charges, $4 million, $3 million, $1 million and $1 million
were included, respectively, in the Chicken, Beef, Pork and Prepared
Foods segments’ Operating Income (Loss) and included in the
Consolidated Statements of Operations in Other charges. As of
September 30, 2006, approximately $3 million of employee termi-
nation benefits had been paid. Employee termination benefits are
expected to be paid through September 2007. No material adjust-
ments to the accrual are anticipated at this time.
In February 2006, the Company announced its decision to close its
Norfolk, Nebraska, beef processing plant and its West Point, Nebraska,
beef slaughter plant. These facilities closed in February 2006. Produc-
tion from these facilities was shifted primarily to the Company’s
beef complex in Dakota City, Nebraska. Combined, these two facili-
ties employed approximately 1,665 employees. In fiscal 2006, the
Company recorded charges of $38 million for estimated impair-
ment charges and $9 million of other closing costs. Other closing
costs include $5 million for employee termination benefits and
$4 million in other plant closing related liabilities. These amounts
were reflected in the Beef segment’s Operating Income (Loss) and
included in the Consolidated Statements of Operations in Other
charges. As of September 30, 2006, approximately $5 million in
employee termination benefits and $4 million of other plant clos-
ing related costs had been paid. No material adjustments to the
total accrual are anticipated at this time. In August 2006, the
Company announced the decision to close its Boise, Idaho, beef
slaughter plant and to scale back processing operations at its Pasco,
Washington, complex. This decision resulted in the elimination of
approximately 770 positions. The closure and processing change
occurred in October 2006 and did not result in a significant
charge to the Company.
In January 2006, the Company announced its decision to close two
of its processed meats facilities in northeast Iowa. The Independence
and Oelwein plants, which produced chopped ham and sliced
luncheon meats, closed in March 2006. Combined, these two facili-
ties employed approximately 400 employees. Equipment from these
facilities was removed and either sold or used at other Tyson loca-
tions, while the plants and related property are currently offered
for sale. In fiscal 2006, the Company recorded charges of $12 million
for estimated impairment charges and $1 million for employee ter-
mination benefits. These amounts were reflected in the Prepared
Foods segment’s Operating Income (Loss) and included in the
Consolidated Statements of Operations in Other charges. As of
September 30, 2006, the employee termination benefits had been
paid. No material adjustments to the total accrual are anticipated
at this time.
During fiscal 2002, the Company recorded $26 million of costs
for the restructuring of its live swine operations that consisted of
$21 million of estimated liabilities for resolution of Company obli-
gations under producer contracts and $5 million of other related
costs associated with this restructuring, including lagoon and pit
closure costs and employee termination benefits. In fiscal 2004, the
Company recorded an additional reserve of $6 million for lagoon
and pit closure costs. These amounts were reflected in the Pork
segment’s Operating Income (Loss) and included in the Consoli-
dated Statements of Operations in Other charges. In fiscal 2005,
the Company announced it agreed to settle a lawsuit that resulted
from the restructuring of its live swine operations. The settlement
resulted in the Company recording an additional $33 million of
costs in the third quarter of fiscal 2005. These additional costs
were reflected in the Pork segment’s Operating Income (Loss) and
included in the Consolidated Statements of Operations in Other
charges. As of September 30, 2006, $49 million in payments to
former producers and $14 million of other related costs have been
paid. No material adjustments to the total accrual are anticipated
at this time.
Ty s on Foods, Inc. 2006 Annual Report31
Notes to Consolidated Financial Statements continued