Tyson Foods 2004 Annual Report Download - page 60

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE TWENTY-ONE : QUARTERLY
FINANCIAL DATA (UNAUDITED)
First Second Third Fourth
in millions, except per share data Quarter Quarter Quarter Quarter
2004
Sales $6,505 $6,153 $6,634 $7,149
Gross profit 394 485 550 462
Operating income 161 263 323 178
Net income 57 119 161 66
Class A basic earnings per share $0.17 $0.35 $0.48 $0.20
Class B basic earnings per share $0.15 $0.32 $0.43 $0.18
Diluted earnings per share $0.16 $0.33 $0.45 $0.19
2003
Sales $5,802 $5,845 $6,330 $6,572
Gross profit 400 380 438 526
Operating income 145 183 201 308
Net income 39 72 79 147
Class A basic earnings per share $0.12 $0.21 $0.23 $0.44
Class B basic earnings per share $0.10 $0.19 $0.21 $0.40
Diluted earnings per share $0.11 $0.20 $0.23 $0.42
The fourth quarter of 2004 was a 14-week period, while the remaining
quarters in the above table were 13-week periods.
First quarter 2004 gross profit includes $61 million in BSE-related
charges and operating income includes $21 million and $4 million
in charges related to the closing of prepared foods facilities and
poultry operations, respectively. Second quarter 2004 operating
income includes charges of $6 million and $8 million related to the
closing of prepared foods facilities and poultry operations, respec-
tively. Third quarter 2004 operating income includes charges of
$1 million related to the closing of a poultry operation. Fourth quarter
2004 gross profit includes $18 million to reduce self insurance reserves
to the actuarially determined range. The reserves are compared to
actuarial estimates semi-annually. Fourth quarter 2004 operating
income includes charges of $25 million related to the impairment
of various intangible assets and $21 million related to fixed asset
write-downs.
First quarter 2003 gross profit includes $28 million received in
connection with vitamin antitrust litigation and operating income
includes charges of $47 million related to the closing of poultry
operations. Second quarter 2003 gross profit includes $94 million
received in connection with vitamin antitrust litigation. Third quarter
2003 gross profit includes $42 million received in connection with
vitamin antitrust litigation and operating income includes charges
of $19 million related to the closing of poultry operations.
Additionally, net income includes a pretax charge of $10 million
related to the write-down of an equity interest in a live swine
operation. Fourth quarter 2003 gross profit includes $3 million
received in connection with vitamin antitrust litigation and operating
income includes $10 million of charges related to the closing of
poultry operations.
NOTE TWENTY-TWO : CONTINGENCIES
Listed below are certain claims made against the Company and its
subsidiaries. In the Company’s opinion, it has made appropriate and
adequate reserves and accruals where necessary and the Company
believes the probability of a material loss beyond the amounts
accrued to be remote; however, the ultimate liability for these
matters is uncertain, and if accruals and reserves are not adequate,
an adverse outcome could have a material effect on the consolidated
financial condition or results of operations of the Company. The
Company believes it has substantial defenses to the claims made
and intends to vigorously defend these cases.
In 2000, the Wage and Hour Division
of the U.S. Department of Labor (DOL) conducted an industry-wide
investigation of poultry producers, including the Company, to
ascertain compliance with various wage and hour issues. As part
of this investigation, the DOL inspected 14 of the Company’s
processing facilities. On May 9, 2002, the Secretary of Labor filed
a civil complaint against the Company in the U.S. District Court for
the Northern District of Alabama. The complaint alleges that the
Company violated the overtime provisions of the federal Fair Labor
Standards Act (FLSA) at the Company’s chicken-processing facility
in Blountsville, Alabama. The complaint does not contain a definite
statement of what acts constituted alleged violations of the
statute, although the Secretary of Labor has indicated in discovery
that the case seeks to require the Company to compensate all
hourly chicken processing workers for pre- and post-shift clothes
changing, washing and related activities and for one of two unpaid
30-minute meal periods. The Secretary of Labor seeks unspecified
back wages for all employees at the Blountsville facility for a period
of two years prior to the date of the filing of the complaint, an
additional amount in unspecified liquidated damages, and an
injunction against future violations at that facility and all other
chicken processing facilities operated by the Company. The parties
are in the process of concluding discovery. The Secretary of Labor’s
motion to extend certain case deadlines is pending before the court.