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 30, 1995
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, 1995, the registrant had outstanding
47,386,037 shares of its common stock ($.05 par value).
PART I. FINANCIAL INFORMATION
IBP, inc. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
September 30, December 31,
1995 1994
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and temporary investments $ 145,855 $ 160,536
Accounts receivable, less allowance for
doubtful accounts of $9,554 and $9,397 614,147 514,800
Inventories (Note C) 304,248 244,048
Deferred income tax benefits and
prepaid expenses 52,002 54,538
_________ _________
TOTAL CURRENT ASSETS 1,116,252 973,922
Property, plant and equipment,
less accumulated depreciation
of $618,590 and $556,769 709,729 651,364
Goodwill, net of accumulated amortization
of $111,177 and $103,217 208,819 216,779
Other assets 28,203 23,398
--------- ---------
$2,063,003 $1,865,463
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts and notes payable $ 270,737 $ 275,595
Current portion of long-term
obligations 55,607 355
Deferred income taxes and other
current liabilities 337,200 338,734
--------- ---------
TOTAL CURRENT LIABILITIES 663,544 614,684
Long-term debt and capital lease
obligations 305,877 361,760
Deferred income taxes and other
liabilities 100,565 108,525
STOCKHOLDERS' EQUITY:
Common stock at par value 2,375 2,375
Additional paid-in capital 435,927 439,567
Retained earnings 557,451 341,492
Currency translation adjustments 977 (1,074)
Treasury stock (3,713) (1,866)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 993,017 780,494
--------- ---------
$2,063,003 $1,865,463
========= =========
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 30, September 24, September 30, September 24,
1995 1994 1995 1994
Net sales $3,290,986 $2,982,479 $9,507,240 $8,841,909
Cost of products sold 3,112,942 2,865,992 9,029,418 8,564,943
--------- --------- --------- ---------
Gross profit 178,044 116,487 477,822 276,966
Selling, general and
administrative
expense 33,483 25,254 94,723 74,345
--------- --------- --------- ---------
EARNINGS FROM OPERATIONS 144,561 91,233 383,099 202,621
Interest expense, net 4,649 9,178 17,428 29,550
--------- --------- --------- ---------
Earnings before income
taxes 139,912 82,055 365,671 173,071
Income tax expense 54,500 32,900 142,600 68,600
--------- --------- --------- ---------
NET EARNINGS $ 85,412 $ 49,155 $ 223,071 $ 104,471
========= ========= ========= =========
Earnings per share $1.76 $1.02 $4.62 $2.17
==== ==== ==== ====
Dividends per share $ .05 $ .05 $ .15 $ .15
==== ==== ==== ====
Average common and common
equivalent shares 48,455 48,146 48,254 48,050
====== ====== ======= ======
Capital expenditures $46,021 $26,822 $116,998 $64,588
====== ====== ======= ======
Depreciation and
amortization expense $20,172 $15,095 $ 72,640 $44,723
====== ====== ======= ======
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 30, September 24,
1995 1994
Inflows (outflows)
NET CASH FLOWS PROVIDED BY OPERATING
ACTIVITIES $ 101,201 $ 48,222
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (116,998) (64,588)
Payment for stock of new subsidiary,
net of cash acquired - (20,595)
Other investing activities, net (3,011) (449)
-------- -------
Net cash flows used in investing
activities (120,009) (85,632)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in checks in process of
clearance 17,375 64,872
Dividends paid (7,115) (25,131)
Payments of long-term debt (645) (7,122)
Other financing activities, net (5,488) (4,253)
-------- -------
Net cash flows provided by
financing activities 4,127 28,366
-------- -------
Net change in cash and
cash equivalents (14,681) (9,044)
Cash and cash equivalents at beginning
of period 160,536 25,196
-------- -------
Cash and cash equivalents at end of
period $ 145,855 $ 16,152
======== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the periods for:
Interest, net of amounts capitalized $ 27,212 $38,410
Income taxes 158,121 38,123
Depreciation and amortization expense 72,640 44,723
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 31, 1994 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 31, 1994.
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 September 30,
1995 and December 31, 1994, and the results of their
operations and their cash flows for the periods presented
herein.
B. OTHER
IBP's interim operating results may be subject to 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 30, December 31,
1995 1994
(In thousands)
Held for sale:
Beef products $186,922 $140,697
Livestock 27,716 27,495
Pork products 33,898 21,829
Other 8,748 6,037
------- -------
257,284 196,058
Supplies 46,964 47,990
------- -------
$304,248 $244,048
======= =======
-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 those described below, will
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 Court ruled that certain incidental activities
may be compensable time. The Tenth Circuit Court of Appeals
affirmed the District Court's ruling. A trial on the issue of
the extent of damages was held on July 10, 1995. No decision
on damages has been entered to date.
A $15,004,000 jury verdict was returned against IBP in
November 1994 in an Iowa State District Court. The plaintiff,
a former IBP employee, sued the company and another former
employee in February 1993 for slander and breach of fiduciary
duty regarding his treatment as a workers' compensation
claimant. The jury determined that the plaintiff sustained
$4,000 in actual damages, and further returned a punitive
damage award against IBP and the other defendant in the amount
of $15,000,000, all of which was provided for by the company
in 1994. On March 2, 1995, the Iowa State District Court
entered an order reducing the punitive damages, to $100,000.
Both IBP and the plaintiff have appealed the Court's March 2,
1995 post-trial order.
-6-
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Continued production efficiencies and increased export sales
contributed to a strong third quarter 1995 performance. Net
earnings for the thirteen weeks ended September 30 totaled $85.4
million or $1.76 per share compared to $49.2 million or $1.02 per
share in the third quarter 1994. Year-to-date 1995 net earnings
through nine months totaled $223.1 million or $4.62 per share
versus $104.5 million or $2.17 per share through September 1994.
Gross profit, measured as a percentage of net sales, improved
to 5.4% in the third quarter 1995 from 3.9% in the same 1994
period. IBP's beef operations were stronger due to higher
production efficiencies and strong demand while pork operations
were weaker in the third quarter 1995 compared to 1994.
For the nine months ended September 30, 1995, gross profit measured
5.0% of net sales versus 3.1% in the first three quarters of 1994.
Beef operations were the most significant contributor to the
improved year-to-date 1995 gross profit. Aiding beef operations in
its contributions were IBP's newest operations, including its
Canadian subsidiary, Lakeside Farm Industries, Ltd. (Lakeside), and
its beef boning division. All other IBP divisions made positive
year-to-date gross profit contributions.
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, past results will not necessarily be indicative of
future performance.
SALES
Net sales in the 1995 third quarter and year-to-date periods
ended September 1995 increased 10.3% and 7.5%, respectively, from
the comparable 1994 periods. An increase in pounds of products
sold in 1995 versus 1994 for both comparison periods was the main
factor in these increased net sales. The additions of Lakeside,
which was an October 1994 purchase, and three beef boning plants
acquired in 1995, were the primary reason for the increase in
pounds of products sold.
Third quarter and year-to-date 1995 net export sales increased
32.7% and 26.6%, respectively, from the same 1994 periods due
chiefly to product mix changes and an increase in pounds of
products sold to Asian markets. Exports to the Far East, IBP's
most significant export market, have increased in part due to
increased demand, lowered import restrictions, favorable currency
exchange rates and development of additional markets. Exports
accounted for 15.4% of consolidated net sales in the third quarter
1995 and 14.4% in the first nine months of 1995 versus 12.8% and
12.2% in the comparative 1994 periods.
-7-
COST OF PRODUCTS SOLD
Increases in the cost of products sold in the third quarter
and year-to-date periods ended September 30, 1995 versus the same
1994 periods resulted primarily from costs incurred at Lakeside and
the beef boning plants. IBP's fresh meats division, exclusive of
new operations, experienced higher livestock costs in the third
quarter 1995 versus 1994 due mostly to an increase in pounds of
products sold. For the same operations, year-to-date 1995
livestock costs were lower than comparative 1994 costs as the
impact of a decrease in the average cost of livestock purchased
overrode an increase in pounds of products sold. Also, an
adjustment in the second quarter 1995 to reduce the estimated
salvage value for most fixed assets to better reflect actual
experience increased year-to-date 1995 cost of products sold by
approximately $17 million.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
The principal components of increased selling, general and
administrative expense in the 1995 third quarter and nine-month
periods versus 1994 were higher accruals for earnings-based
incentive compensation, incremental selling and administrative
expense associated with new operations and increased export-related
selling expense.
INTEREST EXPENSE
Net interest expense was reduced 49.4% in the third quarter
and 41.0% in the year-to-date period ended September 30, 1995
versus the comparable 1994 periods. The favorable effect of long-
term debt reductions of $112 million in the second half of 1994,
increased interest income earned on investment of free cash flows
and increased amounts of interest capitalized on fixed assets were
the principal contributing factors to the lower 1995 net expense.
IBP will prepay in the fourth quarter 1995 both of its
currently outstanding $275 million 9.82% Senior Notes due 2000 and
$75 million 10.93% Senior Subordinated Debentures due 2002. The
company has sent required notices to all holders of its intention
for a complete prepayment of all such outstanding notes and
debentures on December 15, 1995.
Although the company's prepayment premiums will ultimately be
based upon the U.S. treasury market two days before the date of
prepayment, management's calculation of the prepayment premiums as
of November 9, 1995, would be approximately $21 million, net of
applicable taxes, or approximately $.43 per share of IBP's common
stock. The net expense will be classified as an extraordinary loss
in the fourth quarter 1995.
The prepayment of these notes and debentures is part of an
overall refinancing effort to lower IBP's future interest expense
by taking advantage of more favorable debt markets.
-8-
INCOME TAXES
The higher year-to-date 1995 income tax provision compared to
the first nine months of 1994 resulted almost solely from the
increase in pre-tax earnings.
FINANCIAL CONDITION
Total outstanding borrowings averaged $370 million in the
first nine months of 1995 compared to $474 million in the
comparable 1994 period. There were no short-term borrowings under
committed facilities outstanding at September 30, 1995, with
available unused credit capacity of $300 million.
Year-to-date capital expenditures through September 30, 1995
totaled $117 million compared to $65 million in the first nine
months of 1994. The increased 1995 spending was due in part to
continued expansion and renovation of the Logansport, Indiana, pork
plant, purchases of three beef boning plants and various other
expansion projects in progress. The Logansport plant commenced
operations in the third quarter 1995.
-9-
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) IBP filed a report on Form 8-K, dated August 3, 1995 and
received by the Commission on August 7, 1995, describing in
Item 4 a change in the company's certifying accountants.
-10-
IBP, inc. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Amounts in thousands except per share data)
13 Weeks Ended 39 Weeks Ended
-------------------- -------------------
September September September September
30, 24, 30, 24,
1995 1994 1995 1994
--------- --------- --------- ---------
Net earnings $85,412 $49,155 $223,071 $104,471
====== ====== ======= =======
PRIMARY EARNINGS PER SHARE
Shares used in this computation:
Weighted average shares
outstanding 47,363 47,428 47,379 47,444
Dilutive effect of shares under
employee stock plans 1,092 718 875 606
------ ------ ------ ------
Common and common equivalent shares 48,455 48,146 48,254 48,050
====== ====== ====== ======
Primary earnings per share $1.76 $1.02 $4.62 $2.17
==== ==== ==== ====
FULLY-DILUTED EARNINGS PER SHARE
Shares used in this computation:
Weighted average shares
outstanding per above 47,363 47,428 47,379 47,444
Dilutive effect of shares under
employee stock plans 1,186 800 1,232 832
------ ------ ------ ------
Common and common equivalent shares 48,549 48,228 48,611 48,276
====== ====== ====== ======
Fully-diluted earnings per share $1.76 $1.02 $4.59 $2.16
==== ==== ==== ====
-11-
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 10, 1995 /s/ Robert L. Peterson
Chairman of the Board and
Chief Executive Officer
/s/ Larry Shipley
Larry Shipley
Executive Vice President
/s/ Craig J. Hart
Craig J. Hart
Vice President and Controller
-12-
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 145,855
<SECURITIES> 0
<RECEIVABLES> 623,701
<ALLOWANCES> 9,554
<INVENTORY> 304,248
<CURRENT-ASSETS> 1,116,252
<PP&E> 1,328,319
<DEPRECIATION> 618,590
<TOTAL-ASSETS> 2,062,003
<CURRENT-LIABILITIES> 663,544
<BONDS> 305,877
<COMMON> 2,375
0
0
<OTHER-SE> 990,642
<TOTAL-LIABILITY-AND-EQUITY> 2,063,003
<SALES> 9,507,240
<TOTAL-REVENUES> 9,507,240
<CGS> 9,029,418
<TOTAL-COSTS> 9,029,418
<OTHER-EXPENSES> 94,723
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,428
<INCOME-PRETAX> 365,671
<INCOME-TAX> 142,600
<INCOME-CONTINUING> 223,071
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 223,071
<EPS-PRIMARY> 4.62
<EPS-DILUTED> 4.59
</TABLE>
