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 March 30, 1996
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
94,719,038 shares of its common stock ($.05 par value).
PART I. FINANCIAL INFORMATION
IBP, inc. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
March 30, December 30,
1996 1995
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 70,449 $ 116,277
Marketable securities 45,215 63,851
Accounts receivable, less allowance for
doubtful accounts of $9,592 and $9,494 543,356 529,796
Inventories (Note C) 291,919 303,711
Deferred income tax benefits
and prepaid expenses 55,048 55,255
--------- ---------
TOTAL CURRENT ASSETS 1,005,987 1,068,890
Property, plant and equipment,
less accumulated depreciation
of $664,937 and $632,666 742,631 726,859
Goodwill, net of accumulated amortization
of $115,308 and $113,301 206,427 208,434
Other assets 31,524 23,418
--------- ---------
$1,986,569 $2,027,601
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 243,147 $ 306,271
Deferred income taxes and other
current liabilities 306,951 335,378
--------- ---------
TOTAL CURRENT LIABILITIES 550,098 641,649
Long-term debt and capital lease
obligations 260,257 260,752
Deferred income taxes and other
liabilities 104,713 102,261
STOCKHOLDERS' EQUITY:
Common stock at par value 4,750 4,750
Additional paid-in capital 430,927 432,726
Retained earnings 640,592 589,936
Currency translation adjustments 306 116
Treasury stock (5,074) (4,589)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 1,071,501 1,022,939
--------- ---------
$1,986,569 $2,027,601
========= =========
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
-------------------------
March 30, April 1,
1996 1995
--------- ---------
Net sales $3,084,722 $3,006,663
Cost of products sold 2,966,445 2,888,815
--------- ---------
Gross profit 118,277 117,848
Selling, general and
administrative expense 30,874 26,244
--------- ---------
EARNINGS FROM OPERATIONS 87,403 91,604
Interest expense, net 1,776 6,589
--------- ---------
Earnings before income taxes 85,627 85,015
Income tax expense 32,600 33,200
--------- ---------
NET EARNINGS $ 53,027 $ 51,815
========= =========
Earnings per share $ .55 $ .54
==== ====
Dividends per share $.025 $.025
==== ====
Average common and common
equivalent shares 96,865 96,284
====== ======
See accompanying notes to consolidated condensed financial statements.
-3-
IBP, inc. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
13 Weeks Ended
-------------------------
March 30, April 1,
1996 1995
-------- ---------
Inflows (outflows)
NET CASH FLOWS USED IN OPERATING
ACTIVITIES $ (49,316) $ (69,501)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposals of marketable
securities 130,970 121,104
Purchases of marketable securities (117,334) (62,812)
Capital expenditures (33,806) (31,606)
Other investing activities, net (649) 836
-------- --------
Net cash flows (used in) provided
by investing activities (20,819) 27,522
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in revolving
credit borrowings (200,000) -
Proceeds from issuance of long-term
debt 197,862 -
Net change in checks in process
of clearance 32,418 35,188
Dividends paid (2,369) (2,373)
Other financing activities, net (2,642) (1,057)
-------- --------
Net cash flows provided by
financing activities 25,269 31,758
Effect of exchange rate on cash and
cash equivalents (962) 248
-------- --------
Net decrease in cash and
cash equivalents (45,828) (9,973)
Cash and cash equivalents at beginning
of period 116,277 84,229
-------- --------
Cash and cash equivalents at end of
period $ 70,449 $ 74,256
======== ========
SUPPLEMENTAL INFORMATION:
Cash payments during the periods for:
Interest, net of amounts capitalized $ 529 $16,833
Income taxes, net of refunds received 6,062 43,886
Depreciation and amortization expense 19,939 14,185
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 30, 1995 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 30, 1995.
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 as of March 30, 1996, and the
results of their operations and their 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:
March 30, December 30,
1996 1995
-------- -----------
(In thousands)
Held for sale:
Beef products $166,339 $185,500
Pork products 39,528 34,788
Livestock 26,640 26,402
Other 8,125 7,431
------- -------
240,632 254,121
Supplies 51,287 49,590
------- -------
$291,919 $303,711
======= =======
-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 consolidated
results of operations, financial position or liquidity.
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 March 21, 1996, the United
States District Court in Kansas entered an order finding
that certain pre-shift and post-shift activities were
compensable. This order may result in payments to
certain past hourly employees totaling approximately $7
million, including interest, all of which had been
previously provided for. The order also enjoins IBP from
further violations. IBP has filed motions with the trial
court to stay the injunction and to request further relief.
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
IBP achieved record first quarter results for net sales and
net earnings. 1996 net sales of $3.1 billion and net earnings of
$53 million or $.55 per share improved upon the previous record
1995 first quarter, which totaled $3.0 billion in net sales and net
earnings of $52 million or $.54 per share.
Gross profit, measured as a percentage of net sales, decreased
slightly to 3.8% in the first quarter 1996 from 3.9% in the same
1995 period. Beef operations benefited from a steady supply of
market-ready cattle and expanded operations in the first quarter
1996. Meanwhile, pork operations made a positive contribution to
earnings despite encountering difficult market conditions as a
result of tighter hog supplies and normal startup challenges at its
Logansport, Indiana plant, which opened in September 1995.
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
The 3% net sales increase in the first quarter 1996 versus
the first quarter 1995 was mainly attributable to an increase in
the average price of pork products sold although pounds of pork
products sold also increased with the added production at
Logansport. Net beef sales were slightly lower in 1996 as a lower
average price of beef products sold offset an increase in pounds
sold. The increase in pounds of beef products sold was due in part
to the addition of production at three cow boning plants which were
not part of IBP's operations in the first quarter 1995.
Net export sales in the first quarter 1996 increased 23% from
the first quarter 1995 and totaled 16% of total net sales compared
to 14% in the first quarter 1995. Net export sales to all export
regions (Asia, the Americas and Europe) increased over the prior
year and export shipments of red meat, which have the highest
relative value in IBP's product mix, increased as a percentage of
total IBP export volume.
COST OF PRODUCTS SOLD
The 3% increase in the cost of products sold in the first
quarter 1996 over the same 1995 three-month period resulted
primarily from costs incurred at IBP's three cow boning plants,
which became part of IBP's operations in the second quarter 1995.
Comparative livestock costs for operations existing in the first
quarter 1995 decreased from the first quarter 1995 as a reduction
in the average cost of livestock purchased was greater than an
increase in pounds of products sold. Beef and pork plant costs
also increased in 1996 primarily as a result of higher production
volume.
-7-
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expense in the first
quarter 1996 increased 18% from the same 1995 period. Selling
expense increased primarily due to higher export volume-related
expense and volume-driven sales bonus expense. Increases in
general and administrative expense resulted primarily from growth
in several corporate areas to support new or expanding operations.
INTEREST EXPENSE
The 73% decrease in first quarter 1996 net interest expense
from the first quarter 1995 resulted from a lower effective
interest rate due to the refinancing of substantially all of IBP's
long-term obligations at lower rates early in 1996 as well as a $93
million reduction in average borrowings.
INCOME TAXES
The lower effective income tax rate of 38% in the first
quarter 1996 versus 39% in the same 1995 period reflects in part
the effect of increased export sales and their favorable income tax
treatment under IBP's Foreign Sales Corporation.
FINANCIAL CONDITION
Total outstanding borrowings averaged $277 million in the
first three months of 1996 compared to $370 million in the
comparable 1995 period. There were no short-term borrowings
outstanding at March 30, 1996, and available unused credit capacity
under committed facilities totaled $450 million.
In January 1996, IBP completed its public offerings of $100
million principal amount of 6 1/8% Senior Notes due 2006 and $100
million principal amount of 7 1/8% Senior Notes due 2026. These
offerings were part of a total shelf registration of $500 million.
Proceeds from the offerings were used to reduce borrowings under
IBP's revolving credit facility, which amounts were classified as long-
term obligations at December 30, 1995.
Year-to-date capital expenditures through March 30, 1996
totaled $34 million compared to $32 million in the first three
months of 1995. Significant projects in progress in 1996 include
the addition of rendering and processing facilities at the
company's Brooks, Alberta, Canada beef plant as well as expansion
of boxed product material handling facilities at two of IBP's major
beef plants.
-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) IBP filed a report on Form 8-K, dated January 16,
1996 and received by the Commission on January 16,
1996, describing in Item 5 an amendment to IBP's
Registration Statement on Form S-3 (Registration
No. 33-64459) and listing as an exhibit in Item 7
a Statement re: Computation of Ratio of Earnings
to Fixed Charges.
IBP filed a report on Form 8-K dated January 22,
1996 and received by the Commission on January 23,
1996, describing in Item 5 IBP's January 22, 1996
announcement of financial results for the 1995
fourth quarter and fiscal year.
-9-
Exhibit 11
IBP, inc. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(In thousands except per share data)
13 Weeks Ended
------------------------
March 30, April 1,
1996 1995
-------- --------
NET EARNINGS $53,027 $51,815
====== ======
PRIMARY EARNINGS PER SHARE
Shares used in this computation:
Weighted average shares outstanding 94,733 94,792
Dilutive effect of shares under
employee stock plans 2,132 1,492
------ ------
Common and common equivalent shares 96,865 96,284
====== ======
Primary earnings per share $ .55 $ .54
==== ====
FULLY-DILUTED EARNINGS PER SHARE
Shares used in this computation:
Weighted average shares outstanding 94,733 94,792
Dilutive effect of shares under
employee stock plans 2,187 1,597
------ ------
Common and common equivalent shares 96,920 96,389
====== ======
Fully-diluted earnings per share $ .55 $ .54
==== ====
-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 9, 1996 /s/ Robert L. Peterson
-------------------- ------------------------
Date 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
-11-
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> MAR-30-1996
<CASH> 70,449
<SECURITIES> 45,215
<RECEIVABLES> 552,948
<ALLOWANCES> 9,592
<INVENTORY> 291,919
<CURRENT-ASSETS> 1,005,987
<PP&E> 1,407,568
<DEPRECIATION> 664,937
<TOTAL-ASSETS> 1,986,569
<CURRENT-LIABILITIES> 550,098
<BONDS> 260,257
0
0
<COMMON> 4,750
<OTHER-SE> 1,066,751
<TOTAL-LIABILITY-AND-EQUITY> 1,986,569
<SALES> 3,084,722
<TOTAL-REVENUES> 3,084,722
<CGS> 2,966,445
<TOTAL-COSTS> 2,966,445
<OTHER-EXPENSES> 30,874
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,776
<INCOME-PRETAX> 85,627
<INCOME-TAX> 32,600
<INCOME-CONTINUING> 53,027
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,027
<EPS-PRIMARY> .55
<EPS-DILUTED> .55
</TABLE>
