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Filed by Smithfield Foods, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Subject Company: IBP, Inc.
Commission File No. 1-6085
November 28, 2000
FOR IMMEDIATE RELEASE
SMITHFIELD FOODS ANNOUNCES RECORD SECOND QUARTER
EARNINGS DOUBLE THOSE OF LAST YEAR
SMITHFIELD, VIRGINIA, NOVEMBER 28, 2000--Smithfield Foods, Inc. (NYSE:SFD) today
reported record earnings for the second quarter of fiscal 2001. Net income for
the quarter ended October 29, 2000 totaled $44.6 million, or $.81 per diluted
share, versus $22.2 million, or $.48 per diluted share, in the comparable second
quarter of fiscal 2000.
Net income for the first six months of fiscal 2001 totaled $89.1 million, or
$1.61 per diluted share, compared to $29.1 million, or $.62 per diluted share,
in the first half of fiscal 2000. Earnings per share reflect additional shares
outstanding that were issued to acquire Murphy Farms in January.
Higher results for both the current quarter and the first six months of fiscal
2001 were largely attributable to the company's Hog Production Group (HPG) which
benefited from substantially higher live hog prices and the acquisition of
Murphy Farms, which doubled the size of the company's hog raising operations.
Live hog prices were 20 percent higher than a year ago in the second quarter and
30 percent higher in the first six months.
Sales in the current quarter increased 16 percent to $1.4 billion versus $1.2
billion for the prior year, reflecting a 12 percent increase in average unit
selling prices for the company's meat products and sales related to the Murphy
acquisition. Total sales tonnage remained essentially flat compared to the prior
year. Sales for the six-month period increased 20 percent to $2.9 billion from
$2.4 billion, due primarily to a 19 percent increase in average unit selling
prices.
Second quarter operating profit in the company's Meat Processing Group (MPG)
declined 27 percent to $32.4 million from $44.3 million due to sharply lower
fresh pork margins. The lower margins were due to significantly higher live hog
costs, all of which could not be passed through in the form of higher selling
prices.
"Although earnings in our Meat Processing Group were dampened by higher raw
material costs, we made substantial progress on the value-added side of our
business that will contribute to our
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long-term growth," said Joseph W. Luter, III, chairman, president and chief
executive officer. "Our case-ready fresh pork program is progressing ahead of
plan to ship 75 million pounds this year. In fact, sales currently are running
at an annualized rate of 100 million pounds and reflect more than a three-fold
increase in volume over the previous year. These volume levels reflect new
programs at Wal-Mart and other leading food retailers. In addition, we continued
to strengthen our Smithfield Lean Generation Pork label as a national brand, as
tonnage grew 22 percent in the first half," said Mr. Luter.
Operating profit in the current quarter at the HPG totaled $72.7 million,
compared to $13.3 million last year. Results included a pretax gain of $7.0
million for insurance settlements for losses incurred at hog production
facilities related to Hurricane Floyd. The actual losses arising from production
inefficiencies associated with the hurricane were reflected in each of the last
four quarters. Operating profit in the first half at the HPG were $183.9 million
compared to $29.8 million last year. Operating results for the first six months
reflect the combined impact of a 30 percent increase in live hog costs, the
additional hog production of Murphy Farms, improved raising efficiencies and
synergies between the MPG and the HPG.
"Overall, we are very pleased with the second quarter results, given the
somewhat adverse environment for fresh pork. Earnings from our Hog Production
Group more than offset declines in the Meat Processing Group, further evidence
that we have built an enterprise that can withstand various industry cycles and
produce consistent results," said Mr. Luter.
Mr. Luter noted that hog prices have been declining in recent weeks and that
profitability of the Hog Production Group would be lower in the third quarter.
"However, margins in fresh pork have improved significantly. The third quarter
traditionally is the best quarter for the Meat Processing Group as fresh pork
margins generally are good and margins on processed meats peak as a result of
strong sales for the fall and holiday seasons," he said. "We are optimistic that
the third quarter will be substantially better than the same period last year,
with the Meat Processing Group providing the majority of the profits for the
quarter--in sharp contrast to the first and second quarters. Clearly, we remain
on track to achieve another record year for Smithfield Foods."
Mr. Luter also commented on the status of Smithfield Foods' offer to acquire
IBP, Inc.: "We are pleased with the prompt and encouraging response we received
from the Special Committee of IBP's board and are now moving forward with the
process. We have signed a confidentiality agreement, we have begun conducting
our due diligence review, and we have had preliminary discussions with various
regulatory bodies and other public officials. We remain hopeful that we will be
able to complete a definitive merger agreement promptly with IBP, and we remain
enthusiastic about the benefits such a combination could provide for our
respective shareholders, customers, employees and the farming communities we
serve."
Smithfield Foods was ranked the number one FORTUNE 500 food stock in total
return to investors, and placed in the top 15th percentile in total return to
investors among all FORTUNE 500 companies, over the past 10 years. With annual
sales of $5.2 billion, Smithfield Foods is the leading producer and marketer of
fresh pork and processed meats in the United States. For more information,
please visit WWW.SMITHFIELDFOODS.COM.
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SMITHFIELD FOODS/1
CONSOLIDATED
STATEMENTS OF INCOME
SMITHFIELD FOODS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER 13 Weeks Ended 13 Weeks Ended 26 Weeks Ended 26 Weeks Ended
SHARE DATA) October 29, 2000 October 31, 1999 October 29, 2000 October 31, 1999
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<S> <C> <C> <C> <C>
Sales $ 1,430,918 $ 1,230,129 $2,852,244 $ 2,372,544
Cost of sales 1,196,123 1,057,525 2,388,049 2,052,408
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Gross profit 234,795 172,604 464,195 320,136
Selling, general and
administrative expenses 108,417 96,721 212,262 191,306
Depreciation expense 30,524 25,815 61,179 50,674
Interest expense 25,007 16,760 48,395 31,293
Minority interest (923) (875) (1,169) 1,886
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Income before income taxes 71,770 34,183 143,528 44,977
Income taxes 27,194 11,969 54,383 15,833
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Net income $44,576 $ 22,214 $ 89,145 $ 29,144
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Net income per common share:
Basic $ .82 $ .49 $ 1.63 $ .64
Diluted $ .81 $ .48 $ 1.61 $ .62
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Average common shares outstanding:
Basic 54,474 45,585 54,567 45,722
Diluted 55,158 46,433 55,252 46,772
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</TABLE>
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CONTACTS:
FOR INVESTORS: FOR MEDIA:
Jerry Hostetter Josh Pekarsky
Smithfield Foods, Inc. Sarah Zitter Milstein
(212) 758-2100 Kekst and Company
(212) 521-4800
THIS NEWS RELEASE MAY CONTAIN "FORWARD-LOOKING" INFORMATION WITHIN THE MEANING
OF THE FEDERAL SECURITIES LAWS. THE FORWARD-LOOKING INFORMATION MAY INCLUDE
STATEMENTS CONCERNING SMITHFIELD'S OR IBP'S OUTLOOK FOR THE FUTURE, THE ABILITY
TO REALIZE ESTIMATED SYNERGIES, AS WELL AS OTHER STATEMENTS OF BELIEFS, FUTURE
PLANS AND STRATEGIES OR ANTICIPATED EVENTS, AND SIMILAR EXPRESSIONS CONCERNING
MATTERS THAT ARE NOT HISTORICAL FACTS. FORWARD-LOOKING STATEMENTS ARE SUBJECT TO
RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM THOSE EXPRESSED IN, OR IMPLIED BY, THE STATEMENTS. THE FOLLOWING FACTORS,
AMONG OTHERS, COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
EXPRESSED IN, OR IMPLIED BY, THE STATEMENTS: THE RISKS THAT SMITHFIELD'S AND
IBP'S BUSINESSES WILL NOT BE INTEGRATED SUCCESSFULLY, THE RISK THAT SMITHFIELD
AND IBP WILL NOT REALIZE ESTIMATED SYNERGIES, COSTS RELATING TO THE PROPOSED
TRANSACTION, THE AVAILABILITY AND PRICES OF LIVE HOGS, LIVE CATTLE, RAW
MATERIALS AND SUPPLIES, PRODUCT PRICING, THE COMPETITIVE ENVIRONMENT AND RELATED
MARKET CONDITIONS, OPERATING EFFICIENCIES, ACCESS TO CAPITAL, ACTIONS OF
DOMESTIC AND FOREIGN GOVERNMENTS AND OTHER FACTORS DISCUSSED IN SMITHFIELD'S AND
IBP'S RESPECTIVE FILINGS WITH THE SEC.
More detailed information pertaining to Smithfield's proposal will be set forth
in appropriate filings to be made with the SEC. We urge stockholders to read any
relevant documents that may be filed with the SEC because they will contain
important information. Stockholders will be able to obtain a free copy of any
filings containing information about Smithfield and IBP, without charge, at the
SEC's Internet site (HTTP://WWW.SEC.GOV). Copies of any filings containing
information about Smithfield can also be obtained, without charge, by directing
a request to Smithfield Foods, Inc., 200 Commerce Street, Smithfield, Virginia
23430, Attention: Office of the Corporate Secretary (757-365-3000).
This communication shall not constitute an offer to sell or the solicitation of
an offer to buy securities, nor shall there be any sale of securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of such jurisdiction.
Smithfield and certain other persons named below may be deemed to be
participants in the solicitation of proxies. The participants in this
solicitation may include the directors and executive officers of Smithfield. A
detailed list of the names of Smithfield's directors and officers is contained
in Smithfield's proxy statement for its 2000 annual meeting, which may be
obtained without charge at the SEC's Internet site (HTTP://WWW.SEC.GOV).
As of the date of this communication, none of the foregoing participants, other
than Smithfield (which beneficially owns approximately 6.6% of IBP's common
stock), individually beneficially owns in excess of 5% of IBP's common stock.
Except as disclosed above and in Smithfield's proxy statement for its 2000
annual meeting and other documents filed with the SEC including Smithfield's
Schedule 13D relating to the IBP common stock, to the knowledge of Smithfield,
none of the directors or executive officers of Smithfield has any material
interest, direct or indirect, by security holdings or otherwise, in Smithfield
or IBP.
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