Tyson Foods 2008 Annual Report Download - page 60

58 Tyson Foods, Inc.
Notes to Consolidated Financial Statements (continued)
In June 2008, we executed a letter of intent to sell the beef process-
ing, cattle feed yard and fertilizer assets of Lakeside Farm Industries
Ltd. We are reporting Lakeside as a discontinued operation and have
restated the quarterly fi nancial data accordingly.
First quarter fi scal 2008 income from continuing operations before
income taxes includes an $18 million non-operating gain related to
sale of an investment and a $6 million severance charge related to the
FAST initiative. Second quarter fi scal 2008 income from continuing
operations before income taxes includes $47 million in charges related
to restructuring a beef plant operation, closing a poultry plant, impair-
ment of packaging equipment and software impairments. Third
quarter fi scal 2008 loss from continuing operations before income
taxes includes $13 million in charges related to fl ood damage and
impairment of unimproved real property. Fourth quarter fi scal 2008
income from continuing operations before income taxes includes a
$10 million charge related to intangible asset impairments.
Fourth quarter fi scal 2007 income from continuing operations includes
tax expense of $17 million related to a fi xed asset tax cost correction.
NOTE 20: CAPITAL STRUCTURE
In September 2008, we issued 22.4 million shares of Class A stock
as part of a public offering. The shares were offered at $12.75. Net
proceeds, after underwriting discounts and commissions, of approxi-
mately $274 million were used toward the repayment of our borrow-
ings under the accounts receivable securitization facility and for
other general corporate purposes. An entity controlled by Don Tyson
purchased three million shares of Class A stock in this offering.
During fi scal 2007, Tyson Limited Partnership converted 15.9 million
shares of Class B stock to Class A stock on a one-for-one basis.
During fi scal 2006, Tyson Limited Partnership converted 15 million
shares of Class B stock to Class A stock on a one-for-one basis.
Additionally, Don Tyson, a director, converted 750,000 shares of
Class B stock to Class A stock on a one-for-one basis.
NOTE 21: CONTINGENCIES
Listed below are certain claims made against the Company and our
subsidiaries. In our opinion, we have made appropriate and adequate
reserves, accruals and disclosures where necessary, and believe 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 fi nancial condition
or results of operations. We believe we have substantial defenses to
the claims made and intend 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 us, to ascertain compliance with various wage and hour
issues. As part of this investigation, the DOL inspected 14 of our
processing facilities. On May 9, 2002, the DOL fi led a civil complaint
styled Elaine L. Chao, Secretary of Labor, United States Department
of Labor v. Tyson Foods, Inc. against us in the U.S. District Court for
the Northern District of Alabama. The plaintiffs allege in the com-
plaint that we violated the overtime provisions of the federal Fair
Labor Standards Act at our chicken-processing facility in Blountsville,
Alabama. The complaint does not contain a defi nite statement of
what acts constituted alleged violations of the statute, although the
Secretary of Labor indicated in discovery the case seeks to require
us 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 unspecifi ed back wages for all employees at the Blountsville
facility for a period of two years prior to the date of the fi ling of the
complaint, and an additional amount in unspecifi ed liquidated dam-
ages and an injunction against future violations at that facility and
all other chicken processing facilities we operate. The District Court
granted the Company’s motion for partial summary judgment in part,
ruling that the second meal period is appropriately characterized as
non-compensable, and reserving the remaining issues for trial. The
trial is presently set for January 5, 2009.
Several private lawsuits are pending against us alleging that we failed
to compensate poultry plant employees for all hours worked, includ-
ing overtime compensation, in violation of the Fair Labor Standards
Act. These lawsuits include M.H. Fox, et al. v. Tyson Foods, Inc. (Fox),
fi led on June 22, 1999, in the U.S. District Court for the Northern
District of Alabama, and DeAsencio v. Tyson Foods, Inc. (DeAsencio),
fi led on August 22, 2000, in the U.S. District Court for the Eastern
District of Pennsylvania. Each of these matters involves similar allega-
tions that employees should be paid for the time it takes to engage
in pre- and post-shift activities such as changing into and out of
protective and sanitary clothing, obtaining clothing and walking to
and from the changing area, work areas and break areas. The plaintiffs
in these lawsuits seek or have sought to act as class representatives
on behalf of all current and former employees who were allegedly
not paid for time worked and seek back wages, liquidated damages,
pre- and post-judgment interest, and attorneys’ fees. In Fox, the
District Court denied class certifi cation on November 16, 2006, and
ordered the cases of the 10 named plaintiffs in the matter to proceed
individually in the home jurisdictions of the named plaintiffs. Two
of these cases (Brothers and Hatchett) were tried in November 2007
in Alabama with jury verdicts in favor of the plaintiffs. The District
Court recently entered judgment in the fi nal of these cases (Fox) after
the Company made an offer of judgment to Fox, thereby avoiding
trial. However, the District Court must now determine the amount of