Tyson Foods 2005 Annual Report Download - page 57

>> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
TYSON FOODS, INC. 2005 ANNUAL REPORT
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Tyson Foods, Inc. >> 55
Additionally, net income includes a non-recurring income tax net
benefit of $15 million. The net benefit includes the reversal of tax
reserves, partially offset by an income tax charge related to the
repatriation of foreign income.
First quarter fiscal 2004 gross profit included $61 million in BSE-
related charges and operating income included $21 million and
$4 million in charges related to the closing of prepared foods facili-
ties and poultry operations, respectively. Second quarter fiscal 2004
operating income included charges of $6 million and $8 million
related to the closings of prepared foods facilities and poultry
operations, respectively. Third quarter fiscal 2004 operating income
included charges of $1 million related to the closing of a poultry
operation. Fourth quarter fiscal 2004 gross profit included $18 million
to reduce self-insurance reserves to the actuarially determined
range. The reserves are compared to actuarial estimates quarterly.
Fourth quarter fiscal 2004 operating income included charges of
$25 million related to the impairment of various intangible assets
and $21 million related to fixed asset write-downs.
CONTINGENCIES
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Listed below are certain claims made against the Company and its
subsidiaries. In the Company’s opinion, it has made appropriate and
adequate reserves, accruals and disclosures 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.
Wage and Hour/Labor Matters: 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, a civil complaint
was filed against the Company in the U.S. District Court for the
Northern District of Alabama, Elaine L. Chao, Secretary of Labor,
United States Department of Labor v. Tyson Foods, Inc. 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. Discovery is in
process. No trial date has been set. The matter has been stayed
pending the outcome of two other similar matters involving the
donning and doffing of certain personal protective clothing and
equipment before the U.S. Supreme Court Alvarez, et al. v. IBP
(Alvarez, see below) and Tum, et al. v. Barber Foods, Inc. (Tum). On
November 8, 2005, the U.S. Supreme Court affirmed the Ninth
Circuit decision in Alvarez and affirmed in part and reversed in
part the First Circuit decision in Tum. On November 18, 2005,
the Secretary of Labor filed a motion to lift the stay and set
a status conference. The Company has filed a response not
opposing the motion.
On June 22, 1999, 11 current and former employees of the Company
filed the case of M.H. Fox, et al. v. Tyson Foods, Inc. (Fox) in the U.S.
District Court for the Northern District of Alabama claiming the
Company violated requirements of the FLSA. The suit alleges the
Company failed to pay employees for all hours worked and/or
improperly paid them for overtime hours. The suit specifically
alleges that (1) employees should be paid for time taken to put on
and take off certain working supplies at the beginning and end of
their shifts and breaks and (2) the use of “mastercard” or “line” time
fails to pay employees for all time actually worked. Plaintiffs seek
to represent themselves and all similarly situated current and
former employees of the Company, and plaintiffs seek reimburse-
ment for an unspecified amount of unpaid wages, liquidated
damages, attorney fees and costs. To date, approximately 5,100
consents have been filed with the District Court. Plaintiff’s motion
for conditional collective treatment and court-supervised notice to
additional putative class members was denied on February 27, 2004.
The plaintiffs refiled their motion for conditional collective treat-
ment and court-supervised notice to additional putative class
members on April 2, 2004, and the District Court has not ruled
on this motion. Discovery is in process. No trial date has been set.
The matter has been stayed pending the outcome of Alvarez and
Tum. On November 8, 2005, the U.S. Supreme Court affirmed the
Ninth Circuit decision in Alvarez and affirmed in part and reversed
in part the First Circuit decision in Tum. On November 11, 2005,
Plaintiffs filed a motion to lift the stay and to set a status confer-
ence with the District Court. A status conference was scheduled
for December 14, 2005.