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 39 weeks ended September 24, 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 November 1, 1994, the registrant had outstanding
47,440,430 shares of its common stock ($.05 par value).
PART I. FINANCIAL INFORMATION
IBP, inc. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
September 24, December 25,
1994 1993
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and temporary investments $ 16,152 $ 25,196
Accounts receivable, less allowance for
doubtful accounts of $4,999 and $4,198 523,650 449,570
Inventories (Note C) 234,604 191,716
Deferred income tax benefit and
prepaid expenses 36,351 36,839
--------- ---------
TOTAL CURRENT ASSETS 810,757 703,321
Property, plant and equipment,
less accumulated depreciation
of $546,174 and $507,265 627,076 588,781
Goodwill, net of accumulated amortization
of $101,107 and $95,244 217,615 222,794
Other assets 23,352 24,011
--------- ---------
$1,678,800 $1,538,907
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts and notes payable $ 188,962 $ 178,865
Other current liabilities 239,984 187,788
--------- ---------
TOTAL CURRENT LIABILITIES 428,946 366,653
Long-term debt and capital lease
obligations 435,584 460,723
Deferred income taxes and other
liabilities 107,400 98,735
STOCKHOLDERS' EQUITY:
Common stock at par value 2,375 2,375
Additional paid-in capital 439,680 441,959
Retained earnings 266,046 168,695
Treasury stock (1,231) (233)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 706,870 612,796
--------- ---------
$1,678,800 $1,538,907
========= =========
See accompanying notes to consolidated condensed financial statements.
-2-
IBP, inc. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(Amounts in thousands except per share data)
13 Weeks Ended 39 Weeks Ended
September 24, September 25, September 24, September 25,
1994 1993 1994 1993
Net sales $2,982,479 $3,054,184 $8,841,909 $8,842,427
Cost of products sold 2,865,992 2,984,952 8,564,943 8,654,858
--------- --------- --------- ---------
Gross profit 116,487 69,232 276,966 187,569
Selling, general and
administrative
expense 25,254 21,387 74,345 62,625
--------- --------- --------- ---------
EARNINGS FROM OPERATIONS 91,233 47,845 202,621 124,944
Interest expense, net 9,178 10,598 29,550 33,087
--------- --------- --------- ---------
Earnings before income
taxes and cumulative
effect of accounting 82,055 37,247 173,071 91,857
change
Income tax expense 32,900 15,000 68,600 36,800
--------- --------- --------- ---------
Earnings before cumulative
effect of accounting
change 49,155 22,247 104,471 55,057
Cumulative effect of
change in method of
accounting for income
taxes - - - 12,626
--------- --------- --------- ---------
NET EARNINGS $ 49,155 $ 22,247 $ 104,471 $ 67,683
========= ========= ========= =========
EARNINGS PER SHARE:
Earnings before cumulative
effect of accounting
change $1.02 $ .46 $2.17 $1.15
Cumulative effect of
accounting change - - - .26
---- ---- ---- ----
Net earnings $1.02 $ .46 $2.17 $1.41
==== ==== ==== ====
Dividends per share $ .05 $ .05 $ .15 $ .15
==== ==== ==== ====
Average common and common
equivalent shares 48,146 47,969 48,050 47,882
====== ====== ====== ======
See accompanying notes to consolidated condensed financial statements.
-3-
IBP, inc. AND SUBSIDIARIES
CONSOLIDATED CONDENSED
STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
39 Weeks Ended
September 24, September 25,
1994 1993
Inflows (outflows)
NET CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES $ 48,222 $ (69,047)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (64,588) (31,070)
Payment for stock of new subsidiary,
net of cash acquired (20,595) (14,043)
Other investing activities, net (449) 886
Net cash flows used in investing -------- --------
activities (85,632) (44,227)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in checks in process of
clearance 64,872 29,939
Payments of long-term debt (25,131) -
Dividends paid (7,122) (7,124)
Increase in short-term revolving
credit borrowings - 81,928
Other financing activities, net (4,253) (1,487)
Net cash flows provided by -------- --------
financing activities 28,366 103,256
-------- --------
Net change in cash and
cash equivalents (9,044) (10,018)
Cash and cash equivalents at beginning
of period 25,196 25,029
-------- --------
Cash and cash equivalents at end of
period $ 16,152 $ 15,011
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the periods for:
Interest, net of amounts capitalized $38,410 $42,560
Income taxes 38,123 35,371
Depreciation and amortization expense 44,723 44,083
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 as of September 24,
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:
September 24, December 25,
1994 1993
(In thousands)
Beef $159,652 $119,001
Pork 27,437 23,652
Supplies 47,515 49,063
------- -------
$234,604 $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. On October 25, 1994, the Tenth
Circuit Court of Appeals affirmed the lower court's decision
that certain incidental activities of hourly employees should
be considered compensable time, and that IBP be required to
pay restitution for the years involved. The case has been
remanded back to the United States District Court for the
District of Kansas for a determination on the nature and
extent of the damage claim, if any, that may exist.
-6-
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
A combination of plentiful livestock supplies and continued
strong demand for IBP's products created favorable margins that
brought 1994 third quarter and year-to-date net earnings to record
levels. The previous quarterly and nine-month highs were $34.5
million earned in the second quarter 1994 and $67.7 million earned
through nine months in 1993. Gross profit, measured as a
percentage of net sales, improved to 3.9% in the third quarter 1994
compared to 2.3% in the third quarter 1993. For the nine months
ended September, gross profit measured 3.1% in 1994 versus 2.1% in
1993.
The company announced the acquisition of Lakeside Farm
Industries, Ltd. (Lakeside), a diversified Canadian agribusiness
with annual sales of approximately $500 million (U.S. dollars) and
660 employees, early in the fourth quarter 1994. Lakeside's
principal operations include cattle feeding and slaughter
operations. The Lakeside acquisition marks the first time IBP will
have production facilities outside the United States.
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 $7.3 million or $.15 per
share in 1994 and $7.8 million or $.16 per share in the 39 weeks
ended September 1993. These adjustments had no impact on cash
flow.
IBP's selling prices and the prices it pays for live cattle
and hogs are determined by constantly changing market forces of
supply and demand, over which IBP has little or no control.
Therefore, projections based on past results, particularly those of
an interim period, will not necessarily be indicative of future
performance.
SALES
Net sales in the third quarter 1994 decreased 2.3% from the
third quarter 1993 as an 8.0% decrease in the average price of
products sold overrode a 5.6% increase in pounds of products sold.
Through nine months, the virtually unchanged 1994 net sales versus
the same 1993 period resulted from offsetting influences of an 8.8%
increase in pounds of products sold and a similar percentage
decrease in the average price of products sold.
-7-
Net export sales in the third quarter 1994 increased 2.5% from
the third quarter 1993 due primarily to a 10.5% increase in pounds
of export products sold. Year-to-date 1994 net export sales were
3.5% ahead of comparable 1993 net export sales, brought about by a
7.6% increase in pounds of export products sold. Year-to-date 1994
net export sales through September accounted for 12.2% of total net
sales versus 11.8% through the same 1993 period.
COST OF PRODUCTS SOLD
The cost of products sold in the quarter and nine months ended
September 1994 decreased 4.0% and 1.0% 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 production and livestock procurement costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expense increased over 18%
in the 1994 third quarter and nine-month periods versus the
comparable 1993 periods. The higher third quarter 1994 expense
compared to the third quarter 1993 results chiefly from higher
accruals for incentive compensation based upon earnings and pounds
of products sold, as well as increased consulting expense. The
increased year-to-date selling, general and administrative expense
was due primarily to increased incentive compensation and outside
legal costs.
INTEREST EXPENSE
The reductions in net interest expense in the quarterly and
nine-month periods ended September 1994 compared to the same 1993
periods were primarily attributable to reduced average borrowings
outstanding. Outstanding borrowings averaged $104 million less in
the first nine months 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 September versus 1993 resulted almost solely
from increased pre-tax earnings.
FINANCIAL CONDITION
Total outstanding borrowings averaged $474 million in the
first nine months of 1994 compared to $578 million in the
comparable 1993 period. Under IBP's lines of credit, there were no
short-term borrowings outstanding at September 24, 1994, excluding
$75 million classified as long-term debt, with available unused
credit capacity of $225 million.
Year-to-date capital expenditures through September 1994
totaled $64.6 million compared to $31.1 million in the first nine
months of 1993. Expenditures for ham processing plants at Council
Bluffs, Iowa, and Madison, Nebraska, and expansion projects at
other plant locations contributed to the increase.
-8-
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Note D to the consolidated condensed financial statements.
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 September 24, 1994.
-9-
IBP, inc. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Amounts in thousands except per share data)
13 Weeks Ended 39 Weeks Ended
Sept.24, Sept.25, Sept.24, Sept.25,
1994 1993 1994 1993
Earnings before cumulative
effect of accounting change $49,155 $22,247 $104,471 $55,057
Cumulative effect of
accounting change - - - 12,626
------ ------ ------- ------
Net earnings $49,155 $22,247 $104,471 $67,683
====== ====== ======= ======
PRIMARY EARNINGS PER SHARE
Shares used in this computation:
Weighted average shares
outstanding 47,428 47,495 47,444 47,495
Dilutive effect of shares under
employee stock plans 718 474 606 387
------ ------ ------ ------
Common and common equivalent shares 48,146 47,969 48,050 47,882
====== ====== ====== ======
Earnings before cumulative
effect of accounting change $1.02 $ .46 $2.17 $1.15
Cumulative effect of accounting
change - - - .26
---- ---- ---- ----
Primary earnings per share $1.02 $ .46 $2.17 $1.41
==== ==== ==== ====
FULLY-DILUTED EARNINGS PER SHARE
Shares used in this computation:
Weighted average shares
outstanding per above 47,428 47,495 47,444 47,495
Dilutive effect of shares under
employee stock plans 800 605 832 638
------ ------ ------ ------
Common and common equivalent shares 48,228 48,100 48,276 48,133
====== ====== ====== ======
Earnings before cumulative effect
of accounting change $1.02 $ .46 $2.16 $1.15
Cumulative effect of accounting
change - - - .26
---- ---- ---- ----
Fully-diluted earnings per share $1.02 $ .46 $2.16 $1.41
==== ==== ==== ====
-10-
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 November 7, 1994 /s/ 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
-11-
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<NAME> IBP, INC. & SUBSIDIARIES
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