FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the 13 weeks ended March 26, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-6085
_________________________
IBP, inc.
a Delaware Corporation
I.R.S. Employer Identification No. 42-0838666
IBP Avenue
Post Office Box 515
Dakota City, Nebraska 68731
Telephone 402-494-2061
_________________________
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15 (d)
of the Securities Exchange Act of 1934 during the preceding 12
months, and (2) has been subject to such filing requirements
for the past 90 days.
YES [X] NO [ ]
As of May 5, 1994, the registrant had outstanding
47,444,688 shares of its common stock ($.05 par value).
PART I. FINANCIAL INFORMATION
IBP, inc. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
March 26, December 25,
1994 1993
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and temporary investments $ 15,331 $ 25,196
Accounts receivable, less allowance for
doubtful accounts of $4,341 and $4,198 471,350 449,570
Inventories (Note B) 210,404 191,716
Deferred income tax benefits
and prepaid expenses 37,494 36,839
-------- --------
TOTAL CURRENT ASSETS 734,579 703,321
Property, plant and equipment,
less accumulated depreciation
of $518,749 and $507,265 593,657 588,781
Goodwill, net of accumulated amortization
of $97,194 and $95,244 221,528 222,794
Other assets 23,679 24,011
--------- ---------
$1,573,443 $1,538,907
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts and notes payable $ 203,061 $ 178,865
Other current liabilities 193,212 187,788
--------- ---------
TOTAL CURRENT LIABILITIES 396,273 366,653
Long-term debt and capital lease
obligations 448,177 460,723
Deferred income taxes and other
liabilities 99,198 98,735
STOCKHOLDERS' EQUITY:
Common stock at par value 2,375 2,375
Additional paid-in capital 441,516 441,959
Retained earnings 187,172 168,695
Treasury stock (1,268) (233)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 629,795 612,796
--------- ---------
$1,573,443 $1,538,907
========= =========
See accompanying notes to consolidated condensed financial statements.
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IBP, inc. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(In thousands except per share data)
13 Weeks Ended
March 26, March 27,
1994 1993
Net sales $2,819,353 $2,745,361
Cost of products sold 2,750,073 2,691,476
--------- ---------
Gross profit 69,280 53,885
Selling, general and
administrative expense 25,378 22,477
--------- ---------
EARNINGS FROM OPERATIONS 43,902 31,408
Interest expense, net 9,852 11,094
--------- ---------
Earnings before income taxes
and cumulative effect of
accounting change 34,050 20,314
Income tax expense 13,200 8,000
--------- ---------
Earnings before cumulative
effect of accounting change 20,850 12,314
Cumulative effect of change in
the method of accounting for
income taxes - 12,626
--------- ---------
NET EARNINGS $ 20,850 $ 24,940
========= =========
EARNINGS PER SHARE:
Earnings before cumulative
effect of accounting change $ .43 $ .26
Cumulative effect of
accounting change .- .26
---- ----
Net earnings $ .43 $ .52
==== ====
Dividends per share $ .05 $ .05
==== ====
Average common and common
equivalent shares 48,034 47,868
====== ======
See accompanying notes to consolidated condensed financial statements.
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IBP, inc. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
13 Weeks Ended
March 26, March 27,
1994 1993
Inflows (outflows)
NET CASH FLOWS USED IN OPERATING
ACTIVITIES $ (78,426) $ (97,026)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (17,705) (11,104)
Other investing activities, net 202 128
Net cash flows used in investing -------- --------
activities (17,503) (10,976)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in short-term revolving
credit borrowings 35,000 80,954
Net change in checks in process
of clearance 54,967 28,891
Dividends paid (2,374) (2,375)
Other financing activities, net (1,529) (366)
Net cash flows provided by ------- -------
financing activities 86,064 107,104
Net decrease in cash and
cash equivalents (9,865) (898)
Cash and cash equivalents at beginning
of period 25,196 25,029
------- -------
Cash and cash equivalents at end of
period $ 15,331 $ 24,131
======= =======
SUPPLEMENTAL INFORMATION:
Cash payments during the periods for:
Interest, net of amounts capitalized $18,758 $19,923
Income taxes, net of refunds received (558) 3,300
Depreciation and amortization expense 14,518 15,194
See accompanying notes to consolidated condensed financial statements.
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IBP, inc. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
A. GENERAL
The consolidated condensed balance sheet of IBP, inc. and
subsidiaries ("IBP") at December 25, 1993 has been taken from
audited financial statements at that date and condensed. All
other consolidated condensed financial statements contained
herein have been prepared by IBP and are unaudited. The
consolidated condensed financial statements should be read
in conjunction with the consolidated financial statements and
the notes thereto included in IBP's Annual Report on Form
10-K for the year ended December 25, 1993.
In the opinion of management, the accompanying audited and
unaudited consolidated condensed financial statements contain
all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the financial
position of IBP, inc. and its subsidiaries as of March 26,
1994 and December 25, 1993, and the results of its operations
and its cash flows for the periods presented herein.
B. OTHER
IBP's interim operating results may be subject to substantial
fluctuations which do not necessarily occur or recur on
a seasonal basis. Such fluctuations are normally caused by
competitive and other conditions in the cattle and hog
markets over which IBP has little or no control. Therefore,
the results of operations for the interim periods presented
are not necessarily indicative of the results to be attained
for the full fiscal year.
C. INVENTORIES
Inventories, valued at the lower of first-in, first-out cost
or market, are comprised of the following:
March 26, December 25,
1994 1993
(In thousands)
Beef $134,690 $119,001
Pork 26,347 23,652
Supplies 49,367 49,063
------- -------
$210,404 $191,716
======= =======
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IBP, inc. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - CONTINUED
D. COMMITMENTS AND CONTINGENCIES
IBP is involved in various disputes incident to the ordinary
course of its business. In the opinion of management, any
liability for which provision has not been made relative to
the various lawsuits, claims and administrative proceedings
pending against IBP, including that described below, should
not have a material adverse effect on its financial position.
A complaint filed against IBP in April 1988 by the Department
of Labor, Wage and Hour Division, in the United States
District Court in Kansas seeks injunctive relief and back
wages, plus interest, for certain employees of the Company.
The case relates to compensation allegedly due for incidental
activities of hourly employees before and after regular
working hours. In the liability phase of the case, the
district judge ruled that IBP is required to pay back wages
for a portion of the incidental activities. An appeal by the
Company is in progress. The Company's management believes it
has made adequate provision for any liability, the amount of
which, if any, will be determined at a later time.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
IBP experienced a strong operating performance in the
first quarter 1994 versus the year-earlier period, recognizing
higher net sales, earnings from operations and pre-tax
earnings. Gross profit, measured as a percentage of net sales,
improved to 2.5% in the first quarter 1994 compared to 2.0% in
the first quarter 1993. Production efficiencies and relatively
stable market and weather conditions contributed to the
stronger performance.
IBP's required adoption of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," in
the first quarter 1993 added $12.6 million or $.26 per share to
prior year net earnings. This earnings increase was primarily
attributable to the adjustment of "pushdown accounting" fixed
asset bases resulting from IBP's acquisition in 1981. At the
same time, year-to-date 1994 and 1993 net earnings were reduced
by recurring pushdown accounting adjustments, consisting
primarily of goodwill amortization and depreciation of the
higher values assigned to property, plant and equipment,
totaling $2.4 million or $.05 per share in 1994 and $2.8
million or $.06 per share in the 13 weeks ended March 1993.
These adjustments had no impact on cash flow.
The Company recently reached a labor agreement at its
Amarillo, Texas, beef plant with the Teamsters union. The two
parties negotiated a four-year contract which will expire in
1998. IBP also recently entered into a five-year contract with
the United Food and Commercial Workers union representing
hourly employees at its Perry, Iowa pork plant.
SALES
Net sales increased 2.7% in the first quarter 1994
compared to the same 1993 period. An increase in pounds of
products sold more than offset a decrease in the average price
of products sold. Net export sales in the first quarter 1994
increased 12.7% from the first quarter 1993 and accounted for
12.3% of total net sales. Export growth was primarily
attributable to increased red meat and hide sales to
destinations in the Far East.
COST OF PRODUCTS SOLD
The 2.2% increase in cost of products sold in the first
quarter 1994 over 1993 was due primarily to the overall
increase in pounds of products sold. In addition, plant costs
rose in the thirteen-week period ended March 1994 versus 1993
due partially to the higher production volumes and partially to
higher labor costs related to expanded value-added processing.
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
The 12.9% increase in the first quarter 1994 versus the
first quarter 1993 resulted chiefly from higher accruals for
earnings-based and stock-based compensation expense and higher
freezing and warehousing expense related to the increase in
pounds of products sold.
INTEREST EXPENSE
The lower first quarter 1994 net interest expense compared
to the same period in 1993 was due mainly to reduced average
borrowings in the first quarter 1994 versus 1993. Also, the
higher first quarter 1993 expense included payments on interest
rate collars which expired later in 1993.
INCOME TAXES
The increase in pre-tax earnings was the primary factor in
the higher first quarter 1994 income tax provision compared to
the first quarter 1993.
FINANCIAL CONDITION
Total outstanding borrowings averaged $480 million in the
first three months of 1994 compared to $563 million in the
comparable 1993 period. The $83 million reduction in average
borrowings was primarily the result of continued earnings
strength and other positive operating cash flows. Short-term
borrowings outstanding at March 26, 1994, excluding $100
million classified as long-term debt, totaled $35 million with
available unused credit capacity of $255 million.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) See Exhibit 11, statement regarding computation of
earnings per share.
(b) No reports on Form 8-K were filed by the Company
during the quarter ended March 26, 1994.
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Exhibit 11
IBP, inc. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(In thousands except per share data)
13 Weeks Ended
March 26, March 27,
1994 1993
Earnings before cumulative effect
of accounting change $20,850 $12,314
Cumulative effect of accounting change - 12,626
------ ------
Net earnings $20,850 $24,940
====== ======
PRIMARY EARNINGS PER SHARE
Shares used in this computation:
Weighted average shares outstanding 47,462 47,496
Dilutive effect of shares under
employee stock plans 572 372
------ ------
Common and common equivalent shares 48,034 47,868
====== ======
Earnings before cumulative effect
of accounting change $ .43 $ .26
Cumulative effect of accounting change - .26
---- ----
Primary earnings per share $ .43 $ .52
==== ====
FULLY-DILUTED EARNINGS PER SHARE
Shares used in this computation:
Weighted average shares outstanding 47,462 47,496
Dilutive effect of shares under
employee stock plans 580 379
------ ------
Common and common equivalent shares 48,042 47,875
====== ======
Earnings before cumulative effect
of accounting change $ .43 $ .26
Cumulative effect of accounting change - .26
---- ----
Fully-diluted earnings per share $ .43 $ .52
==== ====
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1934,
the registrant has caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
IBP, inc.
(Registrant)
May 9, 1994 /s/ Robert L. Peterson
Date Robert L. Peterson
Chairman of the Board, President
and Chief Executive Officer
/s/ Lonnie O. Grigsby
Lonnie O. Grigsby
Executive Vice President
Finance and Administration
/s/ Craig J. Hart
Craig J. Hart
Controller
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