Tyson Foods 2006 Annual Report Download - page 34

In July 2005, the Company announced its decision to make improve-
ments to one of its Forest, Mississippi, facilities, which included more
product lines, enabling the plant to increase production of processed
and marinated chicken. The improvements were made at the former
Choctaw Maid Farms location, which the Company acquired in fiscal
2003. The Company’s Cleveland Street Forest, Mississippi, poultry
operation ceased operations in March 2006. The Company trans-
ferred the production and employees to the newly upgraded
facilities. The Cleveland Street Forest operation employed approxi-
mately 900 employees. As a result of this decision, the Company
recorded total costs of $9 million for estimated impairment charges
in fiscal 2005. In fiscal 2006, the Company recorded an additional
$2 million for estimated impairment charges. These amounts were
reflected in the Chicken segment’s Operating Income (Loss) and
included in the Consolidated Statements of Operations in Other
charges. No material adjustments to the total accrual are
anticipated at this time.
In July 2005, the Company announced its decision to close its
Bentonville, Arkansas, facility. The Bentonville facility employed
approximately 320 employees and produced raw and partially
fried breaded chicken tenders, fillets, livers and gizzards. The plant
ceased operations in November 2005. The production from this
facility was transferred to the Company’s Russellville, Arkansas,
poultry plant, where an expansion enabled the facility to absorb
the Bentonville facility’s production. As a result of this decision,
the Company recorded total costs of $1 million for estimated
impairment charges and $1 million for employee termination
benefits in fiscal 2005. These amounts were reflected in the
Chicken 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.
In December 2004, the Company announced its decision to close
its Portland, Maine, facility. The Portland operation employed
approximately 285 employees and produced sliced meats and
cooked roast beef. The plant ceased operations February 4, 2005,
and production from this facility was transferred to other locations.
As a result of the decision, the Company recorded total costs of
$4 million which included $2 million of estimated impairment
charges and $2 million of employee termination benefits. In fiscal
2005, the Company reversed approximately $1 million of closing
related liabilities. In fiscal 2006, the Company reversed approxi-
mately $1 million related to employee termination 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.
In fiscal 2004, the Company implemented a control whereby all
plant facilities conduct fixed asset inventories on a recurring basis.
As a result, the Company recorded fixed asset write-down charges
of approximately $21 million in fiscal 2004, of which approximately
$13 million was recorded in the Chicken segment, $5 million in the
Prepared Foods segment, $2 million in the Beef segment and $1 mil-
lion in the Pork segment. Additionally, the Company recorded charges
of approximately $25 million related to the impairment of various
intangible assets, of which $22 million was recorded in the Prepared
Foods segment and $3 million was recorded in the Beef segment.
The impairment charges apply primarily to trademarks acquired in
the acquisition of TFM in 2001. These impairment charges were
included in Other charges on the Company’s Consolidated State-
ments of Operations and resulted primarily from lower product
sales under some of the Company’s regional trademarks as prod-
ucts are increasingly being sold under the Tyson trademark.
In fiscal 2004, the Company announced its decision to consolidate
its manufacturing operations in Jackson, Mississippi, into the former
Choctaw Maid Farms Carthage, Mississippi, facility, which the Company
acquired in the fourth quarter of fiscal 2003. The Jackson location
employed approximately 800 employees and was a poultry facility,
including processing and deboning operations. As a result of this
decision, the Company recorded total costs of approximately
$9 million in fiscal 2004 that included approximately $8 million
of estimated impairment charges and $1 million of employee ter-
mination benefits. These amounts were reflected in the Chicken
segment’s Operating Income (Loss) and included in the Consoli-
dated Statements of Operations in Other charges. The Jackson
location ceased operations in August 2004. The Company has
fully paid its estimated termination benefits. No material adjust-
ments to the total accrual are anticipated at this time.
In fiscal 2003, the Company announced its decision to close its
Manchester, New Hampshire, and Augusta, Maine, Prepared Foods
operations to further improve long-term manufacturing efficien-
cies. The production from these facilities was transferred to other
32 Ty s on Foods, Inc. 2006 Annual Report
Notes to Consolidated Financial Statements continued