SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
__________________________
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the 26 weeks ended June 25, 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 August 2, 1994, the registrant had outstanding
47,462,920 shares of its common stock ($.05 par value).
PART I. FINANCIAL INFORMATION
IBP, inc. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
June 25, December 25,
1994 1993
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and temporary investments $ 16,696 $ 25,196
Accounts receivable, less allowance for
doubtful accounts of $5,461 and $4,198 529,502 449,570
Inventories (Note C) 222,892 191,716
Deferred income tax benefit and
prepaid expenses 37,671 36,839
--------- ---------
TOTAL CURRENT ASSETS 806,761 703,321
Property, plant and equipment,
less accumulated depreciation
of $537,385 and $507,265 617,827 588,781
Goodwill, net of accumulated amortization
of $99,144 and $95,244 219,577 222,794
Deferred income tax benefit and other assets 23,191 24,011
--------- ---------
$1,667,356 $1,538,907
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts and notes payable $ 251,437 $ 178,865
Other current liabilities 212,127 187,788
--------- ---------
TOTAL CURRENT LIABILITIES 463,564 366,653
Long-term debt and capital lease
obligations 435,631 460,723
Deferred income taxes and other
liabilities 106,722 98,735
STOCKHOLDERS' EQUITY:
Common stock at par value 2,375 2,375
Additional paid-in capital 440,622 441,959
Retained earnings 219,265 168,695
Treasury stock (823) (233)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 661,439 612,796
--------- ---------
$1,667,356 $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)
(Amounts in thousands except per share data)
13 Weeks Ended 26 Weeks Ended
June 25, June 26, June 25, June 26,
1994 1993 1994 1993
Net sales $3,040,077 $3,042,882 $5,859,430 $5,788,243
Cost of products sold 2,945,500 2,975,843 5,698,951 5,669,906
--------- --------- --------- ---------
Gross profit 94,577 67,039 160,479 118,337
Selling, general and
administrative expense 27,091 21,348 49,091 41,238
--------- --------- --------- ---------
EARNINGS FROM OPERATIONS 67,486 45,691 111,388 77,099
Interest expense, net 10,520 11,395 20,372 22,489
--------- --------- --------- ---------
Earnings before income
taxes and cumulative
effect of accounting
change 56,966 34,296 91,016 54,610
Income tax expense 22,500 13,800 35,700 21,800
--------- --------- --------- ---------
Earnings before cumulative
effect of accounting
change 34,466 20,496 55,316 32,810
Cumulative effect of
change in method of
accounting for income
taxes - - - 12,626
--------- --------- --------- ---------
NET EARNINGS $ 34,466 $ 20,496 $ 55,316 $ 45,436
========= ========= ========= =========
EARNINGS PER SHARE:
Earnings before cumulative
effect of accounting
change $ .72 $ .43 $1.15 $ .69
Cumulative effect of
accounting change - - - .26
---- ---- ---- ----
Net earnings $ .72 $ .43 $1.15 $ .95
==== ==== ==== ====
Dividends per share $ .05 $ .05 $ .10 $ .10
==== ==== ==== ====
Average common and common
equivalent shares 48,035 47,864 48,022 47,861
====== ====== ====== ======
See accompanying notes to consolidated condensed financial statements.
-3-
IBP, inc. AND SUBSIDIARIES
CONSOLIDATED CONDENSED
STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
26 Weeks Ended
June 25, June 26,
1994 1993
Inflows (outflows)
NET CASH FLOWS USED IN OPERATING ACTIVITIES $ (42,142) $(109,364)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (37,766) (20,613)
Purchase of subsidiary, net of
cash acquired (20,595) -
Other investing activities, net (1,032) 762
Net cash flows used in investing -------- --------
activities (59,393) (19,851)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in short-term revolving
credit borrowings 25,000 84,872
Net change in checks in process of
clearance 75,629 40,177
Dividends paid (4,749) (4,749)
Other financing activities, net (2,845) (687)
Net cash flows provided by -------- --------
financing activities 93,035 119,613
-------- --------
Net decrease in cash and
cash equivalents (8,500) (9,602)
Cash and cash equivalents at beginning
of period 25,196 25,029
Cash and cash equivalents at end of -------- -------
period $ 16,696 $ 15,427
======== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the periods for:
Interest, net of amounts capitalized $ 20,062 $ 22,883
Income taxes, net of refunds received 26,767 22,094
Depreciation and amortization expense 29,628 29,581
See accompanying notes to consolidated condensed financial statements.
-4-
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 at June 25, 1994
and December 25, 1993, and the results of its operations and
its cash flows for the periods presented herein.
Certain reclassifications have been made to prior financial
statements to conform to the current year presentation.
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:
June 25, December 25,
1994 1993
(In thousands)
Beef $147,366 $119,001
Pork 28,216 23,652
Supplies 47,310 49,063
------- -------
$222,892 $191,716
======= =======
-5-
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 hourly 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.
-6-
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Increased supplies of market-ready livestock and improved
production efficiencies helped IBP to a strong earnings performance
in the second quarter 1994. Gross profit, measured as a percentage
of net sales, improved to 3.1% in the second quarter 1994 compared
to 2.2% in the second quarter 1993. For the six months ended June
25, 1994, gross profit measured 2.7% versus 2.0% in the first half
of 1993.
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 $4.9 million or $.10 per
share in 1994 and $5.3 million or $.11 per share in the 26 weeks
ended June 1993. These adjustments had no impact on cash flow.
IBP continued to move into new value-added areas during the
second quarter. The company completed its acquisition of the meats
business of International Multifoods Corporation. The purchase
includes a plant in New Mexico which produces prepared meats for
sale to the food service industry.
In addition, operations began at IBP's ham plant in Council
Bluffs, Iowa, in June 1994. This new facility, located adjacent to
IBP's pork plant, processes, cooks and packages retail and deli
hams. These products are then marketed and distributed by
Doskocil, Inc.
SALES
Net sales in the second quarter 1994 were virtually unchanged
from the second quarter 1993 as a decrease in the average price of
products sold slightly overrode an increase in pounds of products
sold. Through six months, the 1.2% increase in net sales resulted
primarily from an increase in pounds of products sold.
Net export sales in the second quarter 1994 decreased 3.3%
from the second quarter 1993 despite a 4.0% increase in pounds of
export products sold. Year-to-date 1994 net export sales were 4.0%
ahead of comparable 1993 net export sales, brought about by a 6.1%
increase in pounds of export products sold. Year-to-date 1994 net
export sales through June accounted for 12.0% of total net sales
versus 12.1% through the same 1993 period.
-7-
COST OF PRODUCTS SOLD
The cost of products sold in the quarter and six months ended
June 1994 decreased 1.0% and .5% from costs incurred in the
respective 1993 periods. For both comparison periods, a reduction
in the overall average cost of livestock purchased more than offset
the effect of an increase in pounds of products sold and increases
in volume-related plant costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
The primary components of increased selling, general and
administrative expense in the 1994 second quarter and year-to-date
period ended June versus 1993 were higher accruals for incentive
compensation based upon earnings and pounds of products sold,
outside legal costs and bad debt expense.
INTEREST EXPENSE
The reductions in net interest expense in the quarterly and
six-month periods ended June 1994 compared to the same 1993 periods
were primarily attributable to reduced average borrowings
outstanding. Outstanding borrowings averaged $97 million less in
the first half of 1994 compared to 1993 due to sustained earnings
strength and other positive operating cash flows.
INCOME TAXES
The higher quarterly and year-to-date 1994 income tax
provisions through June versus 1993 resulted predominantly from the
increases in pre-tax earnings.
FINANCIAL CONDITION
Total outstanding borrowings averaged $488 million in the
first six months of 1994 compared to $585 million in the comparable
1993 period. Short-term borrowings outstanding at June 25, 1994,
excluding $75 million classified as long-term debt, totaled $25
million with available unused credit capacity of $265 million.
Year-to-date capital expenditures through June 1994 totaled
$37.8 million compared to $20.6 million in the first half of 1993.
Spending for the ham processing plants at Council Bluffs, Iowa, and
Madison, Nebraska, and plant expansion projects at other locations
contributed to the increase.
-8-
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The annual meeting of stockholders of IBP, inc. was held on
April 14, 1994, in Dakota City, Nebraska.
(c) The following matters were voted upon at the annual meeting:
(i) The election of the members of the Board of Directors:
John S. Chalsty
Votes for: 39,806,194
Votes withheld: 209,452
Alec P. Courtelis
Votes for: 39,801,123
Votes withheld: 214,523
Dr. Wendy L. Gramm
Votes for: 39,302,456
Votes withheld: 713,190
Eugene D. Leman
Votes for: 39,727,227
Votes withheld: 288,419
Robert L. Peterson
Votes for: 39,728,220
Votes withheld: 287,426
JoAnn R. Smith
Votes for: 39,306,529
Votes withheld: 709,117
Dale C. Tinstman
Votes for: 39,804,795
Votes withheld: 210,851
(ii) Performance-Based Compensation of the Chief Executive
Officer and Chairman of the Board. Reduction of the
salary of the Chief Executive Officer and Chairman to
one million dollars in 1994, and a bonus for 1994,
payable in 1995, calculated at 1.3 percent of the first
one hundred million dollars of operating earnings plus
1.0 percent of any excess over one hundred million
dollars of operating earnings in order to obtain
deductibility under Section 162 (m) of the Internal
Revenue Code.
Votes for - 36,300,068
Votes against - 2,960,595
Votes abstained - 754,967
-9-
PART II. OTHER INFORMATION - CONTINUED
(iii) Amendment to the IBP Officer Long-Term Stock Plan.
Amendment of the Officer Long-Term Stock plan to allow
participating officers to make an irrevocable election
to defer a cash equivalent that equals the number of
shares to be received by the officer under the plan
multiplied by the closing price of IBP stock on the
date the shares are to be received by the officer with
the elections to defer occuring prior to the officer
rendering services for which the shares are earned and
with deferrals credited to the officer's account in the
IBP Retirement Income Plan.
Votes for - 38,744,298
Votes against - 477,052
Votes abstained - 394,279
(iv) Amendment to the IBP 1993 Stock Option Plan.
Amendment to the 1993 Stock Option plan to limit the
maximum number of options that may be awarded to any
individual participant in one year to 30,000 shares of
common stock in order to optimize the federal corporate
income tax deductibility for compensation granted under
the plan by satisfying the requirements of Section
162 (m) of the Internal Revenue Code.
Votes for - 38,639,511
Votes against - 929,897
Votes abstained - 446,221
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 June 25, 1994.
-10-
EXHIBIT 11
IBP, inc. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Amounts in thousands except per share data)
13 Weeks Ended 26 Weeks Ended
June 25, June 26, June 25, June 26,
1994 1993 1994 1993
Earnings before cumulative effect
of accounting change $34,466 $20,496 $55,316 $32,810
Cumulative effect of accounting
change - - - 12,626
------ ------ ------ ------
Net earnings $34,466 $20,496 $55,316 $45,346
====== ====== ====== ======
PRIMARY EARNINGS PER SHARE
Shares used in this computation:
Weighted average shares
outstanding 47,441 47,494 47,452 47,495
Dilutive effect of shares under
employee stock plans 594 370 570 366
------ ------ ------ ------
Common and common equivalent shares 48,035 47,864 48,022 47,861
====== ====== ====== ======
Earnings before cumulative effect
of accounting change $ .72 $ .43 $1.15 $ .69
Cumulative effect of accounting
change - - - .26
---- ---- ---- ----
Primary earnings per share $ .72 $ .43 $1.15 $ .95
==== ==== ==== ====
FULLY-DILUTED EARNINGS PER SHARE
Shares used in this computation:
Weighted average shares
outstanding per above 47,441 47,494 47,452 47,495
Dilutive effect of shares under
employee stock plans 638 468 643 468
------ ------ ------ ------
Common and common equivalent shares 48,079 47,962 48,095 47,963
====== ====== ====== ======
Earnings before cumulative effect
of accounting change $ .72 $ .43 $1.15 $ .69
Cumulative effect of accounting
change - - - .26
---- ---- ---- ----
Fully-diluted earnings per share $ .72 $ .43 $1.15 $ .95
==== ==== ==== ====
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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)
Date August 8, 1994 /s/ Robert L. Peterson
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
-12-
