Tyson Foods 2010 Annual Report Download - page 55

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NOTE 10: COMMITMENTS
We lease equipment, properties and certain farms for which total rentals approximated $188 million, $175 million and $163 million,
respectively, in fiscal 2010, 2009 and 2008. Most leases have initial terms up to seven years, some with varying renewal periods. The
most significant obligations assumed under the terms of the leases are the upkeep of the facilities and payments of insurance and
property taxes.
Minimum lease commitments under non-cancelable leases at October 2, 2010, were:
in millions
2011 $91
2012 71
2013 51
2014 32
2015 17
2016 and beyond 55
Total $317
We guarantee obligations of certain outside third parties, which consists of a lease and grower loans, all of which are substantially
collateralized by the underlying assets. Terms of the underlying debt cover periods up to eight years, and the maximum potential
amount of future payments as of October 2, 2010, was $69 million. We also maintain operating leases for various types of equipment,
some of which contain residual value guarantees for the market value of the underlying leased assets at the end of the term of the
lease. The remaining terms of the lease maturities cover periods over the next seven years. The maximum potential amount of the
residual value guarantees is $45 million, of which $21 million would be recoverable through various recourse provisions and an
additional undeterminable recoverable amount based on the fair value of the underlying leased assets. The likelihood of material
payments under these guarantees is not considered probable. At October 2, 2010, and October 3, 2009, no material liabilities for
guarantees were recorded.
We have cash flow assistance programs in which certain livestock suppliers participate. Under these programs, we pay an amount for
livestock equivalent to a standard cost to grow such livestock during periods of low market sales prices. The amounts of such
payments that are in excess of the market sales price are recorded as receivables and accrue interest. Participating suppliers are
obligated to repay these receivables balances when market sales prices exceed this standard cost, or upon termination of the
agreement. Our maximum obligation associated with these programs is limited to the fair value of each participating livestock
supplier’s net tangible assets. The potential maximum obligation as of October 2, 2010, was approximately $215 million. The total
receivables under these programs were $51 million and $72 million at October 2, 2010, and October 3, 2009, respectively, and are
included, net of allowance for uncollectible amounts, in Other Assets in our Consolidated Balance Sheets. Even though these
programs are limited to the net tangible assets of the participating livestock suppliers, we also manage a portion of our credit risk
associated with these programs by obtaining security interests in livestock suppliers' assets. After analyzing residual credit risks and
general market conditions, we have recorded an allowance for these programs' estimated uncollectible receivables of $15 million and
$20 million at October 2, 2010 and October 3, 2009, respectively.
The minority partner in our Shandong Tyson Xinchang Foods joint ventures in China has the right to exercise put options to require us
to purchase its entire 40% equity interest at a price equal to the minority partner’s contributed capital plus (minus) its pro-rata share of
the joint venture's accumulated and undistributed net earnings (losses). The put options are exercisable for a five-year term
commencing April 2011. At October 2, 2010, the put options, if they had been exercisable, would have resulted in a purchase price of
approximately $67 million for the minority partner’s entire equity interest. We do not believe the exercise of the put options would
materially impact our results of operations or financial condition.
Additionally, we enter into future purchase commitments for various items, such as grains, livestock contracts and fixed grower fees.
At October 2, 2010, these commitments totaled:
in millions
2011 $829
2012 38
2013 17
2014 12
2015 12
2016 and beyond 36
Total $944