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 April 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 May 1, 1995, the registrant had outstanding
47,413,462 shares of its common stock ($.05 par value).
PART I. FINANCIAL INFORMATION
IBP, inc. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
April 1, December 31,
1995 1994
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and temporary investments $ 92,271 $ 160,536
Accounts receivable, less allowance for
doubtful accounts of $9,178 and $9,397 521,445 514,800
Inventories (Note B) 272,855 244,048
Deferred income tax benefits
and prepaid expenses 54,902 54,538
--------- ---------
TOTAL CURRENT ASSETS 941,473 973,922
Property, plant and equipment,
less accumulated depreciation
of $568,452 and $556,769 670,470 651,364
Goodwill, net of accumulated amortization
of $105,124 and $103,217 214,872 216,779
Other assets 23,789 23,398
--------- ---------
$1,850,604 $1,865,463
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 260,779 $ 275,595
Deferred income taxes and other
current liabilities 287,581 339,089
--------- ---------
TOTAL CURRENT LIABILITIES 548,360 614,684
Long-term debt and capital lease
obligations 361,681 361,760
Deferred income taxes and other
liabilities 111,475 108,525
STOCKHOLDERS' EQUITY:
Common stock at par value 2,375 2,375
Additional paid-in capital 438,978 439,567
Retained earnings 390,936 341,492
Currency translation adjustments (944) (1,074)
Treasury stock (2,257) (1,866)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 829,088 780,494
--------- ---------
$1,850,604 $1,865,463
========= =========
See accompanying notes to consolidated condensed financial statements.
-2-
IBP, inc. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(In thousands except per share data)
13 Weeks Ended
--------------------------
April 1, March 26,
1995 1994
---------- ----------
Net sales $3,006,909 $2,819,353
Cost of products sold 2,889,217 2,753,451
--------- ---------
Gross profit 117,692 65,902
Selling, general and
administrative expense 26,088 22,000
--------- ---------
EARNINGS FROM OPERATIONS 91,604 43,902
Interest expense, net 6,589 9,852
--------- ---------
Earnings before income taxes 85,015 34,050
Income tax expense 33,200 13,200
--------- ---------
NET EARNINGS $ 51,815 $ 20,850
========= =========
Earnings per share $1.08 $ .43
==== ====
Dividends per share $ .05 $ .05
==== ====
Average common and common
equivalent shares 48,142 48,034
====== ======
See accompanying notes to consolidated condensed financial statements.
-3-
IBP, inc. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
13 Weeks Ended
-------------------------
April 1, March 26,
1995 1994
-------- ----------
Inflows (outflows)
NET CASH FLOWS USED IN OPERATING
ACTIVITIES $ (69,253) $ (78,426)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (31,606) (17,705)
Other investing activities, net 736 202
Net cash flows used in investing -------- --------
activities (30,770) (17,503)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in checks in process
of clearance 35,188 54,967
Dividends paid (2,373) (2,374)
Net change in short-term revolving
credit borrowings - 35,000
Other financing activities, net (1,057) (1,529)
Net cash flows provided by -------- --------
financing activities 31,758 86,064
-------- --------
Net decrease in cash and
cash equivalents (68,265) (9,865)
Cash and cash equivalents at beginning
of period 160,536 25,196
-------- --------
Cash and cash equivalents at end of
period $ 92,271 $ 15,331
======== ========
SUPPLEMENTAL INFORMATION:
Cash payments during the periods for:
Interest, net of amounts capitalized $16,833 $18,758
Income taxes, net of refunds received 43,886 (558)
Depreciation and amortization expense 14,185 14,518
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 as of April 1,
1995 and December 31, 1994, 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:
April 1, December 31,
1995 1994
(In thousands)
Held for sale:
Beef products $156,040 $140,697
Livestock 32,445 27,495
Pork products 28,809 21,829
Other 7,046 6,037
------- -------
224,340 196,058
Supplies 48,515 47,990
------- -------
$272,855 $244,048
======= =======
-5-
IBP, inc. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - CONTINUED
D. COMMITMENTS AND CONTINGENCIES
IBP is involved in numerous 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. The trial
on the issue of the extent of damages has been set for
July 10, 1995.
A $15,004,000 judgement was entered 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. IBP and the plaintiff have both appealed the
Court's March 2, 1995 post-trial order.
-6-
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Expanded operations, improved production efficiencies and
increased export sales contributed to a strong first quarter 1995.
Net earnings of $51.8 million in the first quarter 1995 exceeded
first quarter 1994 net earnings of $20.9 million by $30.9 million
or 148%. First quarter 1995 earnings per share of $1.08 were 151%
better than the $.43 earned in the first quarter 1994.
Gross profit, measured as a percentage of net sales, improved
to 3.9% in the first quarter 1995 from 2.3% in the same 1994
period. Both beef and pork operations achieved improved capacity
utilization and operating earnings in 1995 versus the first quarter
1994, while IBP's newest subsidiaries, including Lakeside Farm
Industries, Ltd., Supreme Processed Foods, Inc. and Prepared Foods,
Inc., also contributed to the increased earnings from operations.
In late March and early April 1995, IBP purchased cow
processing facilities owned by Western Packing Company and Gibbon
Packing Company, Inc., marking IBP's entrance into this sector of
the beef processing business. These purchases include plants at
Sealy, Texas, Gibbon, Nebraska, and Tama, Iowa. Cow meat is used
primarily in the production of chopped meats, hamburger and
sausage.
The application of purchase accounting principles resulting
from IBP's acquisition in 1981 has, since that date, reduced IBP's
earnings by the impact of "pushdown" accounting. Amortization of
goodwill and depreciation of the higher values assigned to
property, plant and equipment reduced net earnings by $2.4 million
or $.05 per share in the first quarters of 1995 and 1994. 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, past results will not necessarily be indicative of
future performance.
SALES
Net sales in the first quarter 1995 increased 6.7% from the
first quarter 1994. The increase was primarily attributable to an
increase in pounds of beef and pork products sold. Net sales from
IBP's newest subsidiaries, all of which were acquired or which
commenced operations subsequent to the first quarter 1994, also
contributed to the increase in consolidated net sales.
Net export sales in the first quarter 1995 increased 18.4%
from the first quarter 1994 due chiefly to an 11.7% increase in
pounds of red meat products sold. Red meat sales have a relatively
higher sales value per pound than hides and variety meat items.
The majority of IBP's red meat exports go to destinations in the
Far East, especially to Japan. Exports to Japan have increased in
part due to lowered import restrictions and a stronger yen versus
the dollar.
-7-
COST OF PRODUCTS SOLD
The 4.9% increase in the cost of products sold in the first
quarter 1995 versus the same 1994 three-month period resulted
primarily from costs incurred at IBP's newest subsidiaries,
especially at Lakeside Farm Industries, Ltd., the Company's
Canadian subsidiary acquired in October 1994. For comparative
operations, livestock costs were flat in the first quarter 1995
versus the first quarter 1994 as an increase in pounds of products
sold was offset by a decrease in the average cost of livestock
purchased. Plant costs also increased in 1995 due mostly to higher
production volume.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expense in the first
quarter 1995 increased over 19% from the same 1994 period. The
majority of the higher 1995 expense was due to higher accruals for
earnings-based incentive compensation. Selling and administrative
expense associated with new subsidiaries also contributed to the
higher 1995 expense.
INTEREST EXPENSE
The 33.1% decrease in first quarter 1995 net interest expense
from the first quarter 1994 was the result of reduced average
borrowings and increased amounts of capitalized interest and
interest income from temporary investments.
INCOME TAXES
The higher year-to-date 1995 income tax provision compared to
the first quarter 1994 resulted almost solely from the increase in
pre-tax earnings.
FINANCIAL CONDITION
Total outstanding borrowings averaged $370 million in the
first three months of 1995 compared to $480 million in the
comparable 1994 period. There were no short-term borrowings
outstanding at April 1, 1995, with available unused credit capacity
under committed facilities of $300 million.
The corresponding decreases in cash and current liabilities at
April 1, 1995 from December 31, 1994 resulted primarily from first
quarter 1995 payments for 1994 deferred livestock payables,
incentive compensation and income taxes.
Year-to-date capital expenditures through April 1, 1995
totaled $31.6 million compared to $17.7 million in the first three
months of 1994. The increased 1995 spending was due in part to
continued renovation of the Logansport, Indiana, pork plant 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 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 April 1, 1995.
-9-
Exhibit 11
IBP, inc. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(In thousands except per share data)
13 Weeks Ended
-------------------------
April 1, March 26,
1995 1994
-------- ---------
NET EARNINGS $51,815 $20,850
====== ======
PRIMARY EARNINGS PER SHARE
Shares used in this computation:
Weighted average shares outstanding 47,396 47,462
Dilutive effect of shares under
employee stock plans 746 572
------ ------
Common and common equivalent shares 48,142 48,034
====== ======
Primary earnings per share $1.08 $ .43
==== ====
FULLY-DILUTED EARNINGS PER SHARE
Shares used in this computation:
Weighted average shares outstanding 47,396 47,462
Dilutive effect of shares under
employee stock plans 798 580
------ ------
Common and common equivalent shares 48,194 48,042
====== ======
Fully-diluted earnings per share $1.08 $ .43
==== ====
-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)
May 8, 1995 /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
-11-
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> APR-01-1995
<CASH> 92,271
<SECURITIES> 0
<RECEIVABLES> 530,623
<ALLOWANCES> 9,178
<INVENTORY> 272,855
<CURRENT-ASSETS> 941,473
<PP&E> 1,238,922
<DEPRECIATION> 568,452
<TOTAL-ASSETS> 1,850,604
<CURRENT-LIABILITIES> 548,360
<BONDS> 0
<COMMON> 2,375
0
0
<OTHER-SE> 826,713
<TOTAL-LIABILITY-AND-EQUITY> 1,850,604
<SALES> 2,996,917
<TOTAL-REVENUES> 3,006,909
<CGS> 2,889,217
<TOTAL-COSTS> 26,088
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,589
<INCOME-PRETAX> 85,015
<INCOME-TAX> 33,200
<INCOME-CONTINUING> 51,815
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 51,815
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 1.08
</TABLE>
