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 July 1, 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 August 1, 1995, the registrant had outstanding
47,402,172 shares of its common stock ($.05 par value).
PART I. FINANCIAL INFORMATION
IBP, inc. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
July 1, December 31,
1995 1994
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and temporary investments $ 162,248 $ 160,536
Accounts receivable, less allowance for
doubtful accounts of $9,355 and $9,397 550,300 514,800
Inventories (Note C) 293,365 244,048
Deferred income tax benefits and
prepaid expenses 53,678 54,538
--------- ---------
TOTAL CURRENT ASSETS 1,059,591 973,922
Property, plant and equipment,
less accumulated depreciation
of $602,159 and $556,769 681,418 651,364
Goodwill, net of accumulated amortization
of $109,225 and $103,217 210,771 216,779
Other assets 24,146 23,398
--------- ---------
$1,975,926 $1,865,463
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts and notes payable $ 277,814 $ 275,595
Deferred income taxes and other
current liabilities 312,957 339,089
--------- ---------
TOTAL CURRENT LIABILITIES 590,771 614,684
Long-term debt and capital lease
obligations 361,320 361,760
Deferred income taxes and other
liabilities 112,506 108,525
STOCKHOLDERS' EQUITY:
Common stock at par value 2,375 2,375
Additional paid-in capital 437,530 439,567
Retained earnings 474,409 341,492
Currency translation adjustments (153) (1,074)
Treasury stock (2,832) (1,866)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 911,329 780,494
--------- ---------
$1,975,926 $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 26 Weeks Ended
July 1, June 25, July 1, June 25,
1995 1994 1995 1994
Net sales $3,209,345 $3,040,077 $6,216,254 $5,859,430
Cost of products sold 3,027,259 2,945,500 5,916,476 5,698,951
--------- --------- --------- ---------
Gross profit 182,086 94,577 299,778 160,479
Selling, general and
administrative expense 35,152 27,091 61,240 49,091
--------- --------- --------- ---------
EARNINGS FROM OPERATIONS 146,934 67,486 238,538 111,388
Interest expense, net 6,190 10,520 12,779 20,372
--------- --------- --------- ---------
Earnings before income
taxes 140,744 56,966 225,759 91,016
Income tax expense 54,900 22,500 88,100 35,700
--------- --------- --------- ---------
NET EARNINGS $ 85,844 $ 34,466 $ 137,659 $ 55,316
========= ========= ========= =========
Earnings per share $1.78 $ .72 $2.86 $1.15
==== ==== ==== ====
Dividends per share $ .05 $ .05 $ .10 $ .10
==== ==== ==== ====
Average common and common
equivalent shares 48,273 48,035 48,160 48,022
====== ====== ====== ======
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
July 1, June 25,
1995 1994
Inflows (outflows)
NET CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES $ 42,787 $ (42,142)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (70,977) (37,766)
Purchase of subsidiary, net of
cash acquired - (20,595)
Other investing activities, net 938 (1,032)
-------- --------
Net cash flows used in investing
activities (70,039) (59,393)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in checks in process of
clearance 36,865 75,629
Dividends paid (4,744) (4,749)
Net change in short-term revolving
credit borrowings - 25,000
Other financing activities, net (3,157) (2,845)
-------- --------
Net cash flows provided by
financing activities 28,964 93,035
-------- --------
Net change in cash and
cash equivalents 1,712 (8,500)
Cash and cash equivalents at beginning
of period 160,536 25,196
-------- --------
Cash and cash equivalents at end of
period $ 162,248 $ 16,696
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the periods for:
Interest, net of amounts capitalized $ 12,930 $ 20,062
Income taxes, net of refunds received 102,497 26,767
Depreciation and amortization expense 52,468 29,628
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 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 July 1, 1995 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 substantial
fluctuations which do not necessarily occur or recur on a
regular 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:
July 1, December 31,
1995 1994
(In thousands)
Held for sale:
Beef products $181,622 $140,697
Livestock 29,949 27,495
Pork products 28,942 21,829
Other 5,980 6,037
------- -------
246,493 196,058
Supplies 46,872 47,990
------- -------
$293,365 $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 efficiency, profitable new operations and
increased export sales contributed to a strong second quarter 1995
performance. Net earnings for the thirteen weeks ended July 1
totaled $85.8 million or $1.78 per share compared to $34.5 million
or $.72 per share in the second quarter 1994. The second quarter
1995 results improved upon the fourth quarter 1994 (a fourteen-week
period) net earnings of $77.8 million or $1.61 per share, IBP's
previous best quarterly performance. Year-to-date 1995 net
earnings through six months totaled $137.7 million or $2.86 per
share versus $55.3 million or $1.15 per share through June 1994.
Gross profit, measured as a percentage of net sales, improved
to 5.7% in the second quarter 1995 from 3.1% in the same 1994
period. For the six months ended July 1, 1995, gross profit
measured 4.8% versus 2.7% in the first half of 1994. Both the beef
and pork divisions achieved improved operating earnings in the
first half of 1995 versus 1994, while IBP's newest operations,
including its Canadian subsidiary, Lakeside Farm Industries, Ltd.
(Lakeside), and its cow processing division, also contributed to
the increased earnings from operations.
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 second quarter and year-to-date periods
ended June 1995 increased 5.6% and 6.1%, respectively, from the
comparable 1994 periods. The increases were primarily attributable
to an increase in pounds of products sold, offset somewhat by a
decrease in the average price of products sold. The increases in
pounds of products sold were primarily from beef operations, which
benefited from recently-acquired operations, including Lakeside,
which was an October 1994 purchase, and the three cow plants
purchased in 1995.
Year-to-date 1995 net export sales increased 23.3% from the
first half of 1994 due chiefly to 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 lowered
import restrictions and a weaker U.S. dollar. Exports accounted
for 13.9% of consolidated net sales in the first six months of 1995
versus 12.0% in the same 1994 period.
-7-
COST OF PRODUCTS SOLD
Increases in the cost of products sold in the second quarter
and year-to-date periods ended July 1, 1995 versus the same 1994
periods resulted primarily from costs incurred at Lakeside and the
cow plants. Also, a reduction in estimated salvage value for most
corporate assets to better reflect actual experience increased
second quarter and year-to-date 1995 cost of products sold by $17.1
million. For comparative operations, livestock costs decreased in
the quarterly and six-month 1995 periods compared with the same
1994 timeframes as a decrease in the average cost of livestock
purchased overrode an increase in pounds of products sold.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
The principal components of increased selling, general and
administrative expense in the 1995 second quarter and six-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 41.2% in the second quarter
and 37.3% in the year-to-date period ended July 1, 1995 versus the
comparable 1994 periods. The favorable effect of long-term debt
reductions of $112 million in the second half of 1994, strong
operating cash flows and increased amounts of interest capitalized
on fixed assets were the principal contributing factors to the
lower 1995 net expense.
INCOME TAXES
The higher year-to-date 1995 income tax provision compared to
the first half of 1994 resulted almost solely from the increase in
pre-tax earnings.
FINANCIAL CONDITION
Total outstanding borrowings averaged $369 million in the
first six months of 1995 compared to $488 million in the comparable
1994 period. There were no short-term borrowings under committed
facilities outstanding at July 1, 1995, with available unused
credit capacity of $300 million.
Year-to-date capital expenditures through July 1, 1995 totaled
$71.0 million compared to $37.8 million in the first six 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 cow plants and various expansion projects in
progress. The Logansport plant is scheduled to commence operations
in the third quarter 1995.
-8-
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Note D to the consolidated condensed financial statements.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The annual meeting of stockholders of IBP, inc. was held on
April 19, 1995, in Dakota City, Nebraska.
(b) 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: 41,449,733
Votes withheld: 49,269
Alec P. Courtelis
Votes for: 41,109,911
Votes withheld: 389,091
Dr. Wendy L. Gramm
Votes for: 41,467,470
Votes withheld: 31,532
Eugene D. Leman
Votes for: 40,804,521
Votes withheld: 694,481
Robert L. Peterson
Votes for: 40,802,135
Votes withheld: 696,867
JoAnn R. Smith
Votes for: 41,482,226
Votes withheld: 16,776
Dale C. Tinstman
Votes for: 40,673,026
Votes withheld: 825,976
(ii) Performance-Based Compensation of the Chairman of the
Board and Chief Executive Officer. Sets the annual base
salary of the Chairman of the Board and Chief Executive
Officer at $1,000,000 for the years 1995 through 1999
with a performance-based bonus formula for that
corresponding period based on operating earnings.
Votes for: 36,932,252
Votes against: 4,288,776
Votes abstained: 272,774
-9-
PART II. OTHER INFORMATION - CONTINUED
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 July 1, 1995.
-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
July 1, June 25, July 1, June 25,
1995 1994 1995 1994
Net earnings $85,844 $34,466 $137,659 $55,316
====== ====== ======= ======
PRIMARY EARNINGS PER SHARE
Shares used in this computation:
Weighted average shares
outstanding 47,378 47,441 47,387 47,452
Dilutive effect of shares under
employee stock plans 895 594 773 570
------ ------ ------ ------
Common and common equivalent shares 48,273 48,035 48,160 48,022
====== ====== ====== ======
Primary earnings per share $1.78 $ .72 $2.86 $1.15
==== ==== ==== ====
FULLY-DILUTED EARNINGS PER SHARE
Shares used in this computation:
Weighted average shares
outstanding per above 47,378 47,441 47,387 47,452
Dilutive effect of shares under
employee stock plans 1,076 638 1,098 643
------ ------ ------ ------
Common and common equivalent shares 48,454 48,079 48,485 48,095
====== ====== ====== ======
Fully-diluted earnings per share $1.77 $ .72 $2.84 $1.15
==== ==== ==== ====
-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 August 14, 1995 /s/ Robert L. Peterson
Robert L. Peterson
Chairman of the Board and
Chief Executive Officer
/s/ Lonnie O. Grigsby
Lonnie O. Grigsby
Executive Vice President
/s/ Craig J. Hart
Craig J. Hart
Controller
-12-
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> JUL-01-1995
<CASH> 162,248
<SECURITIES> 0
<RECEIVABLES> 559,655
<ALLOWANCES> 9,355
<INVENTORY> 293,365
<CURRENT-ASSETS> 1,059,591
<PP&E> 1,283,577
<DEPRECIATION> 602,159
<TOTAL-ASSETS> 1,975,926
<CURRENT-LIABILITIES> 590,771
<BONDS> 0
<COMMON> 2,375
0
0
<OTHER-SE> 908,954
<TOTAL-LIABILITY-AND-EQUITY> 1,975,926
<SALES> 6,197,168
<TOTAL-REVENUES> 6,216,254
<CGS> 5,916,476
<TOTAL-COSTS> 61,240
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<LOSS-PROVISION> 0
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<INCOME-PRETAX> 225,759
<INCOME-TAX> 88,100
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