UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 25, 1999
-------------------------------
IBP, inc.
DELAWARE CORPORATION 42-0838666
(State of Incorporation) (Employer Identification Number)
800 STEVENS PORT DRIVE
DAKOTA DUNES, SD 57049
(Address) (Zip Code)
Telephone Number: (605) 235-2061
--------------------------------------------------------------------
Securities registered pursuant to section 12(b) of Act:
Common Stock Registered with the New York Stock
Exchange and the Pacific Stock
Exchange.
Registrant 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 has been subject to such filing
requirements for the past 90 days.
Disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is contained in definitive Proxy Statement
incorporated by reference in Part III of this Form 10-K.
The aggregate market value of the registrant's common stock
held by non-affiliates (104,898,300 shares) based on the New York
Stock Exchange average bid and ask price on March 22, 2000, was
approximately $1.57 billion.
As of March 22, 2000, the registrant had outstanding 106,057
,995 shares of its common stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's 1999 Annual Report to
Stockholders (the "Annual Report") are incorporated by reference in
Parts I, II and IV of this Report. Portions of the registrant's
definitive Proxy Statement dated March 20, 2000, (the "Proxy
Statement") are incorporated by reference in Part III of this
Report. Other documents incorporated by reference in this Report
are listed in the Exhibit Index on pages 15 through 18.
PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
General
IBP, inc., ("IBP") a Delaware corporation, has two business
segments, Fresh Meats and Foodbrands. Fresh Meats produces fresh
beef and processed beef and pork products. Fresh Meats' primary
products include boxed beef and fresh pork which are marketed
mainly in the United States to grocery chains, meat distributors,
wholesalers, retailers, restaurant and hotel chains, and processors
who produce cured and smoked products, such as bacon, ham, luncheon
meats and sausage items. Fresh Meats also produces inedible allied
products, such as hides and other items used to manufacture
products such as leather, animal feed and pharmaceuticals, and
edible allied products, which include variety meat items.
Foodbrands produces frozen and refrigerated food products for the
foodservice industry.
The mailing address of IBP's corporate headquarters is 800
Stevens Port Drive, Dakota Dunes, South Dakota 57049; its telephone
number is (605) 235-2061. All references to "IBP" include IBP,
inc. and its subsidiaries.
Fresh Meats
IBP operates an extensive sales network to service its
customers with regional sales/service centers in the United States
(including an independently-owned contractor in Los Angeles that is
licensed to use IBP trademarks) as well as sales/service centers in
foreign countries.
IBP operates 10 fed beef carcass production facilities in
seven cattle-producing states and one in Canada, which reduce live
cattle to dressed carcass form. Eight of these locations include
processing facilities which conduct fabricating operations to
produce boxed beef. Fed beef consists primarily of young steers
and heifers specifically raised for beef consumption. IBP operates
one ground beef facility in Nebraska. IBP has discontinued
operations at its three cow boning facilities in Iowa, Nebraska and
Texas.
IBP operates six pork carcass facilities in Indiana, Iowa
and Nebraska which reduce live hogs to dressed carcass form. IBP
operates seven processing facilities which conduct fabricating
operations to produce boxed pork. The production process for pork
is similar to that employed in its beef operation.
Foodbrands
The Foodbrands business segment is headed by IBP's wholly-
owned subsidiary Foodbrands America, Inc. ("FAI"). The Foodbrands
business segment is an extension of IBP's Fresh Meats business
segment, offering a wide range of value-added food products to
IBP's customers. Foodbrands manufactures and markets frozen and
refrigerated food products such as pepperoni, beef and pork
toppings, pizza crusts, appetizers, hors d'oeuvres, desserts,
prepared meals, Mexican and Italian foods, soups, sauces, side
dishes, branded and processed meats, and high quality, portion-
controlled steaks and pork chops.
Early in the second quarter of 1999, the Company acquired
the outstanding stock of two companies, H&M Food Systems Company,
Inc. ("H&M") and Zemco Industries, Inc., the owner of Russer Foods.
H&M is a producer of custom-formulated pre-cooked meat products and
prepared foods with two plants in Texas. Russer Foods, based in
Buffalo, New York, produces and markets a variety of premium deli
meats. Both operations are subsidiaries of FAI, and will operate
as part of IBP's Foodbrands business segment. In the third quarter
of 1999, FAI acquired Wilton Foods, Inc. ("Wilton") a leading
producer of premium kosher meals and prepared foods for airlines
and institutions. Wilton also produces premium kosher hors
d'oeuvres and appetizers. Wilton is based in Goshen, New York.
In the third quarter of 1999, IBP (through its IBP Foods,
Inc. subsidiary) purchased a substantial portion of the operating
assets of Thorn Apple Valley, Inc. ("TAVI"), a further processor of
pork and poultry products. The purchase of the TAVI assets
included five processing plants, most of its current assets and a
number of product brand names. The five processing plants acquired
from TAVI will be under the Foodbrands business segment.
On February 7, 2000, the Company acquired all of the stock
of Corporate Brand Foods America, Inc. ("CBFA"), a privately held
processor for the retail and foodservice markets. In the
transaction, which will be accounted for as a pooling of interests,
IBP issued approximately 14.4 million IBP common shares for all of
the outstanding stock of CBFA. The Company also assumed $344
million of CBFA's debt and preferred stock obligations. The CBFA
operations will be part of the Foodbrands business segment.
FINANCIAL INFORMATION ABOUT BUSINESS SEGMENTS
The company's businesses are classified into two business
segments: Fresh Meats and Foodbrands. The contributions of each
business segment to net sales and operating earnings, and the
identifiable assets attributable to each business segment are set
forth in "Note M. - Business Segments" on page 49 of the Annual
Report incorporated herein by reference. The Annual Report is an
Exhibit to this Form 10-K.
History of IBP's Business
IBP was first incorporated in 1960. It began operations in
1961 with a single fed beef carcass production facility located
near Denison, Iowa, in what was then the nation's major cattle-
producing region. IBP grew in the Northern and Central Plains
states over the following nine years and added beef plants in
Dakota City, Nebraska; Emporia, Kansas; and West Point, Nebraska.
IBP expanded into the Southern Plains in 1975, when it built its
Amarillo, Texas facility near the large commercial feedlot
operations of that region. In 1976, it moved into the Pacific
Northwest through the acquisition and expansion of plants in Pasco,
Washington and Boise, Idaho. Company expansion continued in 1980
with construction of a facility in Finney County, Kansas, and in
1983 with the purchase and expansion of a plant in Joslin,
Illinois. In 1990, IBP opened its Lexington, Nebraska fed beef
plant and in 1994 IBP purchased Lakeside Farm Industries, Ltd.
("Lakeside"), an agribusiness company with a fed beef plant in
Brooks, Alberta, Canada. Lakeside was IBP's first plant outside of
the United States. IBP increased its hamburger patty production
capabilities in 1997 with the acquisition of the Columbus,
Nebraska, ground beef facility.
IBP began its cow boning operations in 1995 by acquiring
facilities in Tama, Iowa; Gibbon, Nebraska; and Sealy, Texas. In
1996 IBP acquired its fourth cow boning facility in Palestine,
Texas. In 1998, IBP discontinued operations at its Sealy, Texas
facility; in 1999, IBP discontinued operations at the Palestine,
Texas and Tama, Iowa cow boning operations; and on March 17, 2000,
IBP discontinued operations at its final cow boning operation in
Gibbon, Nebraska.
IBP began pork operations in 1982 when it purchased,
expanded and commenced operation of a pork facility in Storm Lake,
Iowa. Additional pork facilities were added in 1986 in Louisa
County and Council Bluffs, Iowa; in 1987 in Madison, Nebraska; in
1989 in Perry, Iowa; in 1990 in Waterloo, Iowa; and in 1993 in
Logansport, Indiana. In 1994, IBP constructed ham processing
facilities at its Council Bluffs, Iowa and Madison, Nebraska,
locations. IBP no longer produces carcasses at the Council Bluffs,
Iowa facility, however the facility is still used for processing
operations. In 1998, IBP entered into an agreement with Plumrose
USA, Inc. ("Plumrose") wherein Plumrose agreed to lease from IBP
the Council Bluffs, Iowa ham processing facility.
In 1990, IBP added its first value-added operation when a
cooked meats operation was added to the Waterloo, Iowa pork
facility. This operation processed fresh meat into value-added,
consumer-ready items such as pork and beef pizza toppings. In
1994, IBP purchased Prepared Foods, Inc. from International
Multifoods, Inc. that included a plant in Santa Teresa, New Mexico.
In 1995, IBP purchased and renovated a facility in Columbia, South
Carolina. The Santa Teresa and Columbia facilities process fresh
meat into value-added, consumer-ready items. In 1997, IBP
increased its presence in the value-added marketplace with the FAI
and Bruss acquisitions. All of the value-added facilities listed
above have been incorporated into the Foodbrands business segment
and are under FAI's management. FAI operates facilities in Rialto,
California; Riverside, California; Chicago, Illinois; Cherokee,
Iowa; Edwardsville, Kansas; South Hutchinson, Kansas; Hutchinson,
Kansas; Carthage, Missouri; Concordia, Missouri; Piedmont,
Missouri; Newark, New Jersey; Albuquerque, New Mexico; New
Rochelle, New York; Oklahoma City, Oklahoma; Dallas, Texas; Fort
Worth, Texas; Jefferson, Wisconsin; and Green Bay, Wisconsin. In
1999, IBP acquired the stock of H&M with
plants in Lampasas, Texas, and North Richland Hills, Texas; and
acquired the stock of Zemco Industries, Inc. with a plant in
Buffalo, New York. In 1999, IBP acquired certain assets of TAVI,
including plants in Forest City, Arkansas
(currently idle); Detroit, Michigan; Grand Rapids, Michigan; Holly
Ridge, North Carolina; and Ponca City, Oklahoma. In 1999, FAI
acquired the stock of Wilton Foods, Inc. with a plant in Goshen,
NY. In February of 2000, IBP completed the acquisition of the
stock of CBFA, which has facilities
in Independence, Iowa; Oelwien, Iowa; Augusta, Maine; Bangor,
Maine; Portland, Maine; York, Nebraska; Manchester, New Hampshire;
Houston, Texas; and Vernon, Texas.
Prior to August 1981, when it was acquired by Occidental
Petroleum Corporation ("Occidental"), IBP was a publicly-held
corporation listed on the New York Stock Exchange (the "NYSE").
From August 1981 to October 1987, IBP was a wholly-owned subsidiary
of Occidental. In October 1987, IBP sold 49.5% of its common stock
and was again listed on the NYSE.
On September 4, 1991, Occidental offered all of its shares
of IBP Common Stock to Occidental's stockholders and certain
standby underwriters in an underwritten rights offering. As a
result of this transaction, Occidental sold its remaining IBP
Common Stock.
Operations
Cattle and Hog Supplies
IBP does not currently have facilities of its own to raise
cattle or hogs in the United States. However, IBP has entered into
various risk-sharing and procurement arrangements with producers
that help secure a supply of livestock for daily start-up
operations at its facilities. IBP's Canadian subsidiary, Lakeside,
has cattle feeding facilities, other agricultural divisions and a
beef carcass production and boxed beef processing facility. In
1999, Lakeside's feedlots provided approximately 23% of that
facility's fed cattle needs. IBP's main supply of live cattle and
hogs is purchased by IBP buyers who are trained to select high
quality animals. IBP's buyers purchase cattle and hogs on a daily
basis, generally a few days before the animals are required for
processing. Live animals are generally held in IBP's holding pens
for only a few hours.
Production Process - Fresh Meats
IBP's fed beef carcass production facilities reduce live fed
cattle to dressed carcass form and process allied products. IBP's
beef processing facilities conduct fabricating operations to
produce boxed beef. IBP's fed carcass and beef processing
facilities operated in 1999 at approximately 85% and 84%,
respectively, of their production capacities. Due to variances in
product mix that may be processed at a ground beef facility, it is
difficult to estimate a facility's capacity. However, in 1999, IBP
estimates its Columbus, Nebraska ground beef facility operated at
approximately 50% of its production capacity.
IBP's cow boning facilities operating in 1999 produced beef
trimmings and boneless cuts of beef that were further processed by
IBP and sold to customers who produce hamburger, sausage and deli
meats. IBP's cow boning facilities operated in 1999 at
approximately 63% of their production capacity.
IBP's pork facilities produce fresh boxed pork for shipment
to customers, as well as pork bellies, hams and boneless picnic
meat for shipment to customers who further process the pork into
bacon, cooked hams, luncheon meats and sausage items. In 1999,
IBP's pork facilities operated at approximately 84% of their
production capacity.
Throughout production, edible beef, cow boning and pork
allied products, such as variety meat items, are segregated and
prepared for shipment or further refinement. Inedible beef, cow
boning and pork products derived from processing operations are
used in the manufacture of leather, animal feed, gelatin,
pharmaceuticals and cosmetics.
Eight of IBP's fed beef and cow boning plants include hide
treatment facilities. The majority of the hides from IBP's other
fed beef plants are transported to these facilities, which include
brine curing operations and, in four locations, chrome hide
tanneries. The chrome tanning process produces a semifinished
product that is shipped to leather good manufacturers worldwide.
Brine-cured hides are sold to other tanneries. IBP is the largest
chrome tanner of cattle hides in the United States.
Production Process - Foodbrands
IBP's Foodbrands production facilities process fresh beef,
fresh pork, and other raw materials into pizza toppings, portion-
controlled steaks and pork chops, branded and processed meats,
appetizers, hors d'oeuvres, desserts, ethnic foods, soups, sauces,
side dishes and pizza crusts. Due to variances in product mix that
may be processed at a value-added facility, it is difficult to
estimate a facility's capacity. However, in 1999, IBP estimates
the Foodbrands facilities operated at approximately 85% of their
production capacity.
Facilities
The corporate headquarters of IBP are located in Dakota
Dunes, South Dakota. IBP believes that its plants are among the
most modern in the world and strives to maintain and enhance its
facilities. Generally, plants and additions are designed by IBP's
personnel. IBP generally considers its existing plants and
equipment to be in excellent condition. IBP's capital spending for
2000 is expected to be in the range of $400 million, which includes
expenditures for environmental compliance activities. Its
principal plants as of December 25, 1999, are described below.
Fresh Meats - Beef
IBP's ten U.S. fed beef carcass production facilities are
located in the states of Idaho, Illinois, Iowa, Kansas, Nebraska,
Texas and Washington. IBP's eleventh fed beef carcass production
facility is in Alberta, Canada. At these locations, eight have
processing facilities, eight have hide treatment or tanning
operations, six have cold storage freezer operations and one has a
tallow refining plant. IBP's one cow boning facility as of
December 25, 1999 was located in Nebraska. IBP also has a ground
beef processing facility in Nebraska.
Fresh Meats - Pork
IBP's six pork carcass production and seven processing
facilities are located in the states of Indiana, Iowa and Nebraska.
At these locations, four have cold storage freezer operations and
two have skinning operations.
Foodbrands
IBP's forty-three facilities under the Foodbrands business
segment are located in Arkansas, California, Illinois, Iowa,
Kansas, Maine, Massachusetts, Michigan, Missouri, Nebraska, New
Hampshire, New Jersey, New Mexico, New York, North Carolina,
Oklahoma, South Carolina, Texas and Wisconsin.
Sales
IBP's customers for beef, pork and value-added products
include domestic and international grocery chains, meat
distributors, wholesalers, retailers, warehouse clubs, foodservice
distributors, restaurant and hotel chains, and meat processors who
produce cured and smoked products, such as bacon, ham, luncheon
meat and sausage items. Most sales are made pursuant to daily
orders as opposed to long-term supply contracts. In each of the
past three years for Fresh Meats, IBP's largest beef customer
accounted for less than 5% of its annual beef net sales, and its
largest pork customer accounted for less than 6% of its pork net
sales. In each of the past three years, Foodbrands' largest
customer accounted for less than 15% of its annual net sales. For
the same periods, IBP's largest customer for all products combined
accounted for less than 4% of its annual net sales.
IBP sells to international customers through foreign and
domestic sales offices. In fiscal 1999, export sales accounted for
approximately 12% of IBP's net sales, which compares to
approximately 12% in fiscal 1998 and 13% in fiscal 1997.
International sales, which includes all consolidated company sales
to customers outside the United States, totaled 15% of consolidated
net sales in 1999, 15% in 1998 and 16% in 1997.
Some allied products are sold as commodities in bulk, while
other items are trimmed, boxed and frozen by IBP. Cattle hides are
sold for both domestic and international use. Uncured and brine-
cured hides are sold to tanneries for further processing. Chrome-
tanned hides are sold to tanneries and directly to further
processors of leather.
Distribution
Fresh Meats
Most products are shipped by trucks, generally from plants
located closest to the purchaser, although other plants may
supplement such deliveries, depending upon prevailing supplies and
product demand.
Foodbrands
Foodbrands' products are transported by independent carriers
from its distribution/customer service centers in Detroit,
Michigan; Edwardsville, Kansas; and Rialto, California, or are
shipped directly from the production facility with a view toward
achieving an efficient, cost-effective method of distribution.
Customer requirements vary from the need for large quantities of a
limited number of products to small quantities of a number of
items, each requiring a different distribution method. From the
distribution centers, orders for customers of the different
divisions can be filled and delivered in a single shipment
regardless of the variety of products ordered or the location of
the manufacturing facility at which they are produced. The company
also can combine for shipment the orders of many smaller customers
in the same geographic region. Management believes this flexible
distribution system allows the company to provide superior service
to its customers by reducing the time between the placement of
customer orders and delivery of the company's products. This also
lowers the customer's shipping costs through the elimination of
higher-cost, fragmented deliveries.
Competition
Fresh Meats
The primary industry in which IBP operates is highly
competitive and characterized by very small margins. IBP considers
its principal competition to come from domestic producers of fresh
beef and pork products, although IBP also competes with other
suppliers of protein, including other red meats, poultry, seafood,
grain, dairy products, eggs, soya and other protein products.
Competition exists both in the purchase of live cattle and hogs, as
well as in the sale of beef and pork products. The principal
competitive element in both buying and selling is price.
Failure to accurately assess the quality of cattle and hogs
can result in (i) the payment of an excessive price if the
livestock yields less than expected or (ii) the failure to bid a
price sufficiently high to purchase high quality livestock. To
effectively compete in the purchase of cattle, a cattle buyer must
be able to accurately judge the yield and quality of the cattle to
establish price. As part of IBP's cattle buying process, each
cattle buyer prepares an estimate by lot of the yield and quality
of the cattle purchased. IBP prepares a report on each lot that
compares the actual yield and quality to the buyer's initial
estimate. This enables IBP to monitor the quality of various
cattle producers and to measure the skill of its cattle buyers,
both of which are critical factors in determining IBP's success and
competitiveness.
IBP's hog buyers generally purchase hogs based upon an
average daily bid price. The average daily bid price is adjusted
for each producer by tracking the producer's yield and quality
results. From the results of the producer's prior sales, IBP is
able to generate a discount or a premium which adjusts the average
daily bid for that individual producer. In addition, IBP has
recently introduced an animal ultrasound system to its pork
facilities to measure the quality and other factors regarding the
profitability of a hog. IBP believes this purchasing system is one
of the most advanced and accurate methods for establishing carcass
values in the industry.
Product quality, product mix, location and service, in
addition to price, are important competitive elements in the sale
of fresh beef and pork products.
IBP is the largest producer of fresh beef and one of the
largest producers of pork products in the United States. IBP
believes that its two largest beef competitors in 1999 were
Monfort, a subsidiary of ConAgra, Inc. ("ConAgra") and Excel
Corporation, a subsidiary of Cargill, Incorporated. IBP believes
that its largest pork competitors in 1999 were Smithfield Foods,
Inc.; ConAgra; and Hormel Foods Corp.
Foodbrands
Foodbrands' products are sold in highly competitive markets
competing with a significant number of companies of various sizes.
The principal competitive factors in these markets are price,
service, innovative products, and quality.
Employees
As of December 25, 1999, IBP had approximately 45,000
employees. Whenever possible, production employees are recruited
locally and trained by IBP for specific tasks.
IBP considers its relations with its employees at its plants
to be good. Approximately 14,600 hourly employees at 23 of
IBP's 59 production facilities are represented by labor
organizations. The labor contracts applicable to these plants
expire as follows (IBP has included the plants acquired from CBFA
in this table even though such plants were not part of IBP's
operations on December 25, 1999):
Contract Expiration
Plant Union Date
----- ----- --------------------
Amarillo, Texas Teamsters (1) November 2002
Chicago, Illinois (3) Teamsters (1) April 2001
Detroit, Michigan (3) Teamsters (1) August 2004
Grand Rapids, Teamsters (1) January 2001
Michigan (3)
Manchester, Teamsters (1) December 2000
New Hampshire (3)
Pasco, Washington Teamsters (1) May 2004
Rialto, California (3) Teamsters (1) September 2001
Albuquerque, New Mexico UFCW (2) November 2000
Augusta, Maine UFCW (2) December 2004
Cherokee, Iowa UFCW (2) March 2004
Chicago, Illinois UFCW (2) July 2003
Concordia, Missouri UFCW (2) June 2001
Dakota City, Nebraska UFCW (2) August 2004
Detroit, Michigan UFCW (2) August 2004
Grand Rapids, Michigan UFCW (2) August 2003
Holly Ridge, UFCW (2) April 2004
North Carolina
Holly Ridge, UFCW (2) August 2000
North Carolina (3)
Jefferson, Wisconsin UFCW (2) June 2002
Joslin, Illinois UFCW (2) December 2000
Logansport, Indiana UFCW (2) October 2003
Manchester, UFCW (2) December 2000
New Hampshire
Newark, New Jersey UFCW (2) December 2003
North Richland Hills, UFCW (2) August 2001
Texas
Perry, Iowa UFCW (2) May 2003
Ponca City, Oklahoma UFCW (2) March 2004
Riverside, California UFCW (2) May 2001
Rialto, California UFCW (2) May 2001
Waterloo, Iowa UFCW (2) June 2002
Buffalo, New York IUOE (4) June 2002
- -----------------
(1) Teamsters local unions affiliated with The International
Brotherhood of Teamsters, Chauffeurs, Warehousemen, and
Helpers of America.
(2) United Food and Commercial Workers, International Union,
AFL-CIO.
(3) These contracts at the Chicago, Illinois; Detroit, Michigan;
Grand Rapids, Michigan; Holly Ridge, North Carolina;
Manchester, New Hampshire; and Rialto, California facility
cover those employees working in distribution.
(4) International Union of Electrical Workers.
Regulatory Matters
IBP's operations are subject to the constant inspection and
regulation of the United States Department of Agriculture (the
"USDA"), including (i) regulations of the USDA's Grain Inspection,
Packers and Stockyards Administration, (ii) continuous in-plant
inspection of IBP's production facilities (along with each live
animal, each carcass and all edible products) by USDA employees to
ensure compliance with USDA standards and (iii) grading of beef
carcasses by USDA employees.
IBP is subject to federal, state and local laws and
regulations governing environmental protection. In 1999, IBP
incurred expenses of approximately $20 million to maintain
compliance with such regulations. Except as disclosed in the
Annual Report, pages 50-51, section entitled "Notes to
Consolidated Financial Statements," at "Note O. -
Contingencies," IBP believes that it is in substantial compliance
with such applicable laws and regulations and IBP is not aware of
any violations of, or pending changes in, such laws and
regulations that are likely to result in material penalties or
material increases in compliance costs. IBP incurred $12 million
in capital expenditures for environmental control facilities in
fiscal 1999 and anticipates capital expenditures of approximately
$54 million in fiscal 2000 for environmental related projects.
EXECUTIVE OFFICERS OF THE REGISTRANT
Age at Positions With IBP and
February 18, Five-Year Employment
Name 2000 History
- ---- ------------ ----------------------
Richard L. Bond 52 President and Chief
Operating Officer since
1997; Director since 1995;
1995-1997 President, Fresh
Meats; 1994-1995 Executive
Vice President, Beef; 1989-
1994 Group Vice President,
Beef Sales and Marketing;
1982-1989 Vice President,
Boxed Beef Sales and
Marketing
R. Randolph Devening 57 Chief Executive Officer of
Foodbrands America, Inc.
since 2000; 1994-2000 Chief
Executive Officer and
President, Foodbrands
America, Inc.; Chairman of
the Board, Foodbrands
America, Inc. 1994 to 1997
Craig J. Hart 44 Vice President and
Controller since 1995;
1993-1995 Assistant Vice
President and Controller;
1990-1993 Controller
Eugene D. Leman 57 Chief Executive Officer,
Fresh Meats since 2000;
Director since 1989; 1995-
2000 President, Fresh
Meats; 1995-1997 President,
Allied Group; 1986-1995
Executive Vice President,
Pork Division; 1981-1986
Group Vice President, Pork
Division
Robert L. Peterson 67 Chairman of the Board of
Directors since 1981; Chief
Executive Officer since
1980; Director since 1976;
1979-1995 President
Larry Shipley 44 Chief Financial Officer
since 2000; 1997-2000
President, IBP Enterprises
and Chief Financial
Officer; 1995-1997
Executive Vice President,
Corporate Development; 1995
Senior Vice President,
Corporate Development;
1994-1995 Assistant to the
Chairman; 1989-1994
Assistant to the President.
ITEM 3. LEGAL PROCEEDINGS
Incorporated by reference from the Annual Report, pages 50-
51, section entitled "Notes to Consolidated Financial Statements,"
at "Note O. - Contingencies."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of IBP's security
holders during the fourth quarter of 1999.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Incorporated by reference from Annual Report, page 39,
section entitled "Consolidated Statements of Changes in
Stockholders' Equity and Comprehensive Income"; and from page 51,
section entitled "Notes to Consolidated Financial Statements," at
"Note P. - Quarterly Financial Data (Unaudited)".
IBP's Common Stock was held by approximately 5,500
stockholders of record at year-end 1999. The Common Stock is
listed on the New York and Pacific Stock Exchanges.
ITEM 6. SELECTED FINANCIAL DATA
Selected Financial Data
(in thousands, except net sales and per share data)
<TABLE>
52 Weeks Ended
--------------------------------------------------------------
Dec. 25, Dec. 26, Dec. 27, Dec. 28, Dec. 30,
1999 1998 1997 1996 1995
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net sales (in millions) $ 14,075 $ 12,849 $ 13,259 $ 12,539 $ 12,668
Gross profit 902,247 662,208 442,892 443,582 604,068
Selling, general
and administrative
Expense 373,774 288,473 216,176 120,674 123,972
Earnings from
Operations 528,473 373,735 226,716 322,908 480,096
Interest expense, net 45,412 43,213 38,002 3,373 20,784
Income taxes 169,800 125,700 71,700 120,800 179,200
Extraordinary loss (1) - (14,815) - - (22,189)
Net earnings 313,261 190,007 117,014 198,735 257,923
PER SHARE DATA:
Earnings per share:
Earnings before
extraordinary item $3.39 $2.21 $1.26 $2.10 $2.96
Extraordinary loss (1) - (.16) - - (.24)
Net earnings 3.39 2.05 1.26 2.10 2.72
Earnings per share -
assuming dilution:
Earnings before
extraordinary item $3.36 $2.19 $1.25 $2.07 $2.92
Extraordinary loss (1) - (.16) - - (.23)
Net earnings 3.36 2.03 1.25 2.07 2.69
Dividends per share .10 .10 .10 .10 .10
FINANCIAL CONDITION:
Working capital $ 206,301 $ 231,003 $ 207,109 $ 540,903 $ 427,241
Total assets 3,713,239 3,008,096 2,838,941 2,174,495 2,027,601
Long-term obligations 586,528 575,522 568,281 260,008 260,752
Stockholders' equity 1,708,768 1,400,914 1,237,069 1,203,655 1,022,939
</TABLE>
(1) Extraordinary loss on early extinguishment of debt, net of
applicable income taxes.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Incorporated by reference from the Annual Report, pages
52-56, section entitled "Management's Discussion and Analysis."
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Incorporated by reference from the Annual Report page 55,
section entitled "Market Risk."
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated by reference from the Annual Report, pages
34-51, sections entitled "Report of Independent Accountants,"
"Consolidated Financial Statements," and "Notes to Consolidated
Financial Statements."
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Incorporated by reference from the Proxy Statement, page
14, section entitled "INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS."
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference from the Proxy Statement,
pages 2-4, section entitled "ELECTION OF DIRECTORS" and reference
is also made to the information regarding executive officers set
forth in "EXECUTIVE OFFICERS OF THE REGISTRANT" in Part I of this
report.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from the Proxy Statement,
pages 9-12, section entitled "SUMMARY COMPENSATION TABLE"; "OPTION
GRANTS TABLE," "AGGREGATED OPTION EXERCISES AND YEAR-END OPTION
VALUE TABLE," "PERFORMANCE GRAPH," and from page 5, section
entitled "ELECTION OF DIRECTORS," subsection "Information
Regarding Directors' Compensation."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Incorporated by reference from the Proxy Statement, page
2 and page 6, sections entitled "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS" and "SECURITY OWNERSHIP OF MANAGEMENT."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from the Proxy Statement,
pages 4-5, sections entitled "ELECTION OF DIRECTORS," subsection
"Information Regarding the Board of Directors and its Committees"
and from page 8, section entitled "COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION DECISIONS."
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) Documents filed as part of this report.
The following financial information is
incorporated by reference from the Annual Report,
as identified below, or is found in this report.
1. Consolidated Financial Location
---------------------- --------
Statements
----------
Report of Independent Accountants Annual Report, page 34
and page 19 of this
report
Consolidated Statements of Earnings Annual Report, page 35
Consolidated Balance Sheets Annual Report, pages
36-37
Consolidated Statements of Cash Flows Annual Report, page 38
Consolidated Statements of Changes Annual Report, page
in Stockholders' Equity and 39
Comprehensive Income
Notes to Consolidated Financial Annual Report, pages
Statements 40-51
2. Financial Statement Schedule
Reports of Independent Accountants on Financial
Statement Schedule
Schedule II Valuation and Qualifying Accounts and
Reserves
All other schedules are omitted because they are not
applicable or not required.
3. Exhibits
3.1* Restated Certificate of Incorporation of IBP (filed
as Exhibit No. 3.1. to the Annual Report on Form
10-K of IBP for the fiscal year ended December 28,
1996, File No. 1-6085).
3.2* Restated By-laws of IBP.
10.1 Registration Rights Agreement between IBP and the
holders of restricted shares of IBP Common Stock
(the holders received such restricted shares in
exchange for common shares of CBFA in the CBFA
acquisition).
10.5* IBP's 1987 Stock Option Plan (Compensatory
Plan)(filed as Exhibit No. 28(a) to IBP's
Registration Statement on Form S-8, dated January
5, 1988, File No. 33-19441).
10.5.1* Form of Stock Option Agreement (10/1/87)
(Compensatory Plan) (filed as Exhibit No. 28(b) to
IBP's Registration Statement on Form S-8, dated
January 5, 1988, File No. 33-19441).
10.5.2* Form of Stock Option Agreement (12/31/87)
(Compensatory Plan) (filed as Exhibit No. 28(c) to
IBP's Registration Statement on Form S-8, dated
January 5, 1988, File No. 33-19441).
10.5.3* IBP Officer Long-Term Stock Plan (Compensatory Plan)
(filed as Exhibit No. 10.5.3 to the Annual Report
on Form 10-K of IBP for the fiscal year ended
December 25, 1993, File No. 1-6085).
10.5.4* IBP Directors Stock Option Plan (Compensatory Plan)
(filed as Exhibit No. 10.5.4 to the Annual Report
on Form 10-K of IBP for the fiscal year ended
December 25, 1993, File No. 1-6085).
10.5.5* IBP 1993 Stock Option Plan (Compensatory Plan)
(filed as Exhibit No. 10.5.5 to the Annual Report
on Form 10-K of IBP for the fiscal year ended
December 25, 1993, File No. 1-6085).
10.5.6* 1996 Officer Long-Term Stock Plan (Compensatory
Plan) (filed as Exhibit No. 10.5.6 to the Annual
Report on Form 10-K of IBP for the fiscal year
ended December 28, 1996, File No. 1-6085).
10.5.7* 1996 Stock Option Plan (Compensatory Plan) (filed as
Exhibit 10.5.7 to the Annual Report on Form 10-K of
IBP for the fiscal year ended December 28, 1996.
File No. 1-6085).
10.8* Form of IBP's Indemnification Agreement with
officers and directors (Management Contract) (filed
as Exhibit No. 10.8 to IBP's Registration Statement
on Form S-1, dated August 19, 1987, File No. 1-
6085).
10.21* Credit Agreement (Revolving/Term Credit Facility)
dated as of December 21, 1995, between IBP, inc.
and various lenders with First Bank National
Association as Administrative Agent and Bank of
America National Trust and Savings Association as
Co-Agent. (filed as Exhibit No. 10.21 to the
Annual Report on Form 10-K of IBP, for the fiscal
year ended December 30, 1995, File No. 1-6085).
10.24* Employment Agreement, effective as of August 18,
1997, between IBP and Larry Shipley (Management
Contract) (filed as Exhibit No. 10.24 to the Annual
Report on Form 10-K of IBP for the fiscal year
ended December 27, 1997, File No. 1-6085).
10.25* Employment Agreement, effective as of March 1, 1997,
between IBP and Richard L. Bond (Management
Contract)(filed as Exhibit No. 10.25 to the Annual
Report on Form 10-K of IBP for the fiscal year
ended December 27, 1997, File No. 1-6085).
10.26* Employment Agreement, effective as of March 1, 1997,
between IBP and Eugene D. Leman (Management
Contract)(filed as Exhibit No. 10.26 to the Annual
Report on Form 10-K of IBP for the fiscal year
ended December 27, 1997, File No. 1-6085).
10.27* Employment Agreement, effective as of December 22,
1995 between IBP and Craig Hart (Management
Contract)(filed as Exhibit 10.27 to the Annual
Report on Form 10-K of IBP for the fiscal year
ended December 26, 1998, File No. 1-6085).
10.28* Text of Retirement Income Plan of IBP, inc. (As
Amended and Restated Effective as of January 1,
1992), as amended. (Compensatory Plan) (filed as
Exhibit No. 10.28 to the Annual Report on Form 10-K
of IBP for the fiscal year ended December 26, 1992,
File No. 1-6085).
13. 1999 Annual Report to Stockholders.
21. Subsidiaries of IBP, inc. as of December 25, 1999.
22.* Matters submitted to vote of security holders (filed
as Item 4 to the Quarterly Report on Form 10-Q for
the 26 weeks ended June 26, 1999, File No. 1-6085).
23.1 Consent of Independent Public Accountants
(PricewaterhouseCoopers LLP).
27. Financial Data Schedule.
- ------------------
* Incorporated herein by reference
(b) Reports on Form 8-K
Not Applicable
(c) Other Matters
With the exception of the information expressly referenced
and thereby incorporated in ITEMS 3, 5, 6, 7 and 8, the Annual
Report is not to be deemed "filed" with the Securities and Exchange
Commission or otherwise subject to the liabilities of Section 18 of
the Securities and Exchange Act of 1934.
For the purpose of complying with the amendments to the rules
governing Form S-8 (effective July 13, 1990) under the Securities
Act of 1933, IBP hereby undertakes as follows, which undertaking
shall be incorporated by reference into IBP's Registration
Statement on Form S-8 No. 33-19441 (filed January 5, 1988):
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of IBP pursuant to the foregoing provisions, or
otherwise, IBP has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
IBP of expenses incurred or paid by a director, officer or
controlling person of IBP in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, IBP will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of IBP, inc.
Our audits of the consolidated financial statements referred to in
our report dated February 7, 2000, which has been incorporated by
reference in this Form 10-K from page 34 of the 1999 Annual Report
to Stockholders of IBP, inc., also included an audit of the
financial statement schedule listed in Item 14(a)(2) of this Form
10-K. In our opinion, this financial statement schedule presents
fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial
statements.
/s/ PricewaterhouseCoopers LLP
- --------------------------------
Omaha, Nebraska
February 7, 2000
IBP, inc. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
AND RESERVES
Fiscal Years 1997, 1998, and 1999
(In thousands)
Allowance
for Doubtful
Accounts
------------
Balance, December 28, 1996 $ 9,873
Amounts charged to costs and expenses 514
Recoveries of amounts previously
written off 39
Write-off of uncollectible accounts (829)
Other 466
-------
Balance, December 27, 1997 10,063
Amounts charged to costs and expenses 1,890
Recoveries of amounts previously
written off 231
Write-off of uncollectible accounts (101)
Other 28
-------
Balance, December 26, 1998 12,111
Amounts charged to cost and expenses 11,952
Recoveries of amounts previously
written off 100
Write-off of uncollectible accounts (8,147)
Other 479
-------
Balance, December 25, 1999 $ 16,495
=======
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereto duly authorized.
IBP, inc.
By:
Robert L. Peterson
Chairman of the Board
and Chief Executive Officer
Date: 3/23/00
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Robert L. Peterson Chairman of the Board 3/23/00
- ---------------------- and Chief Executive ---------
Robert L. Peterson Officer (principal
executive officer)
/s/ Larry Shipley Chief Financial 3/23/00
- ---------------------- Officer (principal ---------
Larry Shipley financial officer)
/s/ Craig J. Hart Vice President and 3/23/00
- ---------------------- Controller ---------
Craig J. Hart
/s/ Richard L. Bond Director 3/23/00
- ---------------------- ---------
Richard L. Bond
/s/ John S. Chalsty Director 3/23/00
- ---------------------- ---------
John S. Chalsty
______________________ Director
Wendy L. Gramm ---------
/s/ John J. Jacobson, Jr. Director 3/23/00
- ------------------------- ---------
John J. Jacobson, Jr.
/s/ Eugene D. Leman Director 3/23/00
- ---------------------- ---------
Eugene D. Leman
/s/ Michael L. Sanem Director 3/23/00
- ---------------------- ---------
Michael L. Sanem
/s/ Martin A. Massengale Director 3/23/00
- ------------------------ ---------
Martin A. Massengale
/s/ JoAnn R. Smith Director 3/23/00
- --------------------- ---------
JoAnn R. Smith
______________________________________________________
BY-LAWS
OF
IBP, inc.
(Incorporated under the Laws of the State of Delaware)
As amended through February 24, 1999
______________________________________________________
TABLE OF CONTENTS
ARTICLE I
Offices
Section 1. Registered Office 1
Section 2. Other Offices 1
ARTICLE II
Meetings of Stockholders
Section 1. Place of Meeting 1
Section 2. Annual Meetings 1
Section 3. Special Meetings 2
Section 4. Notice of Meetings 2
Section 5. Quorum 3
Section 6. Adjournments 3
Section 7. Conduct of Meeting 3
Section 8. List of Stockholders 5
Section 9. Voting 5
Section 10.
Inspector of Election 7
ARTICLE III
Board of Directors
Section 1. General Powers 8
Section 2. Number, Qualification and Election 8
Section 3. Notification of Nominations 8
Section 4. Quorum and Manner of Acting 11
Section 5. Place of Meeting 11
Section 6. Regular Meeting 11
Section 7. Special Meetings 11
Section 8. Notice of Meetings 12
Section 9.
Rules and Regulations 12
Section 10.
Participation in Meeting by Means
of Communications Equipment 12
Section 11. Action Without Meeting 12
Section 12. Resignations 13
Section 13. Removal of Directors 13
Section 14. Vacancies 13
Section 15. Compensation 14
ARTICLE IV
Executive and Other Committees
Section 1. Executive Committee 14
Section 2. Other Committees 16
Section 3. Procedure, Meetings, Quorum 16
ARTICLE V
Officers
Section 1. Number; Term of Office 18
Section 2. Removal 18
Section 3. Resignation 19
Section 4. Vacancies 19
Section 5. Chairman of the Board 19
Section 6. The President 19
Section 7. Vice-Presidents 19
Section 8. Treasurer 20
Section 9. Secretary 20
Section 10. Controller 20
Section 11. Assistant Treasurers, Secretaries
and Controllers 20
ARTICLE VI
Indemnification of Directors, Officers,
Employees and Agents
Section 1.
Third Party Actions 21
Section 2. Derivative Actions 21
Section 3.
Determination of Indemnification 22
Section 4.
Right of Indemnification 23
Section 5.
Advance of Expenses 23
Section 6.
Indemnification by a Court 23
Section 7.
Indemnification Not Exclusive 24
Section 8.
Insurance 24
Section 9.
Indemnification to Continue 25
Section 10.
Definitions of Certain Terms 25
ARTICLE VII
Capital Stock
Section 1.
Certificates for Shares 26
Section 2.
Transfer of Shares 26
Section 3.
Addresses of Stockholders 27
Section 4.
Lost, Destroyed and Mutilated Certificates 27
Section 5.
Regulations 28
Section 6.
Fixing Date for Determination of Stockholder of
Record 28
ARTICLE VIII
Seal
ARTICLE IX
Fiscal Year
ARTICLE X
Waiver of Notice
ARTICLE XI
Form of By-law for Amendment of By-laws
Section 1.
Amendments 31
Section 2.
Entire Board of Directors 32
ARTICLE XII
Miscellaneous
Section 1.
Execution of Documents 32
Section 2.
Deposits 32
Section 3.
Checks 33
Section 4. Proxies in Respect of Stock or Other Securities
of Other Corporations 33
Section 5. By-laws Subject to Law and Restated Certificate
of Incorporation of the Corporation 33
ARTICLE I
Offices
Section 1. Registered Office. The registered office
of IBP, inc. (hereinafter called the "Corporation" in the
State of Delaware shall be at Corporation Trust Center,
1209 Orange Street, Wilmington, Delaware 19801, in the City
of Wilmington, County of New Castle, and the registered
agent in charge thereof shall be The Corporation Trust
Company.
Section 2. Other Offices. The Corporation may also
have an office or offices, and keep the books and records
of the Corporation, except as may otherwise be required by
law, at such other place or places, either within or
without the State of Delaware, as the Board of Directors
may from time to time determine or the business of the
Corporation require.
ARTICLE II
Meetings of Stockholders
Section 1. Place of Meeting. All meetings of the
stockholders of the Corporation shall be held at the office
of the Corporation or at such other places, within or
without the State of Delaware, as may from time to time be
fixed by the Board of Directors.
Section 2. Annual Meetings. The annual meeting of
the stockholders of the Corporation for the election of
directors and for the transaction of such other business as
may properly come before the meeting shall be held on the
first Wednesday in June in each year, if not a legal
holiday under the laws of the place where the meeting is to
be held, and, if a legal holiday, then on the next
succeeding day which is not a legal holiday under the laws
of such place, or on such other date and at such hour as
may from time to time be fixed by the Board of Directors.
Section 3. Special Meetings. Subject to the
provisions of any Preferred Stock Designation (as such term
is defined in the Restated Certificate of Incorporation of
the Corporation), special meetings of the stockholders for
any purpose or purposes may be called only by the Chairman
of the Board of Directors of the Corporation or a majority
of the entire Board of Directors. Only such business as is
specified in the notice of any special meeting of the
stockholders shall come before such meeting.
Section 4. Notice of Meetings. Written notice of
each meeting of the stockholders, whether annual or
special, shall be given, either by personal delivery or by
mail, not less than 10 nor more than 60 days before the
date of the meeting to each stockholders or record entitled
to notice of the meeting. If mailed, such notice shall be
deemed given when deposited in the United States mail,
postage prepaid, directed to the stockholder at such
stockholder's address as it appears on the records of the
Corporation. Each such notice shall state the place, date
and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is
called. Notice of any meeting of stockholders shall not be
required to be given to any stockholder who shall attend
such meeting in person or by proxy without protesting,
prior to or at the commencement of the meeting, the lack of
proper notice to such stockholder, or who shall waive
notice thereof as provided in Article X of these By-laws.
Notice of adjournment of a meeting of stockholders need not
be given if the time and place to which it is adjourned are
announced at such meeting, unless the adjournment is for
more than 30 days or, after adjournment, a new record date
is fixed for the adjournment meeting.
Section 5. Quorum. The holders of a majority of the
votes entitled to be cast by the stockholders entitled to
vote, which if any vote is to be taken by classes shall
mean the holders of a majority of the votes entitled to be
cast by the stockholders of each such class, present in
person or by proxy, shall constitute a quorum for the
transaction of business at any meeting of the stockholders.
Section 6. Adjournments. In the absence of a quorum,
the holders of a majority of the votes entitled to be cast
by the stockholders, present in person or by proxy, may
adjourn the meeting from time to time. At any such
adjourned meeting at which a quorum may be present, any
business may be transacted which might have been transacted
at the meeting as originally called.
Section 7. Conduct of Meeting. At each meeting of
the stockholders, the Chairman of the Board, or, in the
absence of the Chairman of the Board, such person
designated by the Board of Directors, shall act as
Chairman. No business may be transacted at an annual
meeting of stockholders, other than business that is either
(a) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board of
Directors (or any duly authorized committee thereof), (b)
otherwise properly brought before the annual meeting by or
at the direction of the Board of Directors (or any duly
authorized committee thereof), or (c) otherwise properly
brought before the annual meeting by any stockholder of the
Corporation (i) who is a stockholder of record on the date
of the giving of the notice provided for in this Section 7
and on the record date for the determination of
stockholders entitled to vote at such annual meeting and
(ii) who complies with the notice procedures set forth in
this Section 7.
In addition to any other applicable requirements, for
business to be properly brought before an annual meeting by
a stockholder, such stockholder must have given timely
notice thereof in proper written form to the Secretary of
the Corporation.
To be timely, a stockholder's notice to the Secretary
must be delivered to or mailed and received at the
principal executive offices of the Corporation not less
than sixty (60) days nor more than ninety (90) days prior
to the anniversary date of the immediately preceding annual
meeting of stockholders; provided, however, that in the
event that the annual meeting is called for a date that is
not within sixty (60) days before or after such anniversary
date, notice by the stockholder in order to be timely must
be so received not later than the close of business on the
tenth (10th) day following the day on which such notice of
the date of the annual meeting was mailed or such public
disclosure of the date of the annual meeting was made,
whichever first occurs.
To be in proper written form, a stockholder's notice
to the Secretary must set forth as to each matter such
stockholder proposes to bring before the annual meeting (i)
a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting
such business at the annual meeting, (ii) the name and
record address of such stockholders, (iii) the class or
series and number of shares of capital stock of the
Corporation which are owned beneficially or of record by
such stockholder, (iv) a description of all arrangements or
understandings between such stockholder and any other
person or persons (including their names) in connection
with the proposal of such business by such stockholder and
any material interest of such stockholder in such business,
and (v) a representation that such stockholder intends to
appear in person or by proxy at the annual meeting to bring
such business before the meeting.
No business shall be conducted at the annual meeting
of stockholders except business brought before the annual
meeting in accordance with the procedures set forth in this
Section 7; provided, however, that once business has been
properly brought before the annual meeting in accordance
with such procedures, nothing in this Section 7 shall be
deemed to preclude discussion by any stockholder of any
such business. If the Chairman of an annual meting
determines that business was not properly brought before
the annual meeting in accordance with the foregoing
procedures, the Chairman shall declare to the meeting that
the business was not properly brought before the meeting
and such business shall not be transacted.
Section 8. List of Stockholders. It shall be the
duty of the Secretary or other officer of the Corporation
who has charge of the stock ledger to prepare and make, at
least 10 days before each meeting of the stockholders, a
complete list of the stockholders entitled to vote thereat,
arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in
such stockholder's name. Such list shall be produced and
kept available at the times and places required by law.
Section 9. Voting. Each stockholder of record of any
class or series of stock having a preference over any class
of Common Stock of the Corporation as to dividends or upon
liquidation shall be entitled at each meeting of
stockholders to such number of votes for each share of such
stock as may be fixed in the Restated Certificate of
Incorporation or pursuant to the provisions of any
Preferred Stock Designation and each stockholder of record
of Common Stock shall be entitled at each meeting of
stockholders to one vote for each share of such stock, in
each case, registered in such stockholder's name on the
books of the Corporation;
(1) on the date fixed pursuant to Section 6 of Article
VII of these By-laws as the record date for the
determination of stockholders entitled to notice of and to
vote at such meeting; or
(2) if no such record date shall have been so fixed,
then at the close of business on the day next preceding the
day on which notice of such meeting is given, or, if notice
is waived, at the close of business on the day next
preceding the day on which the meeting is held, or, if
action is taken by written consent without a meeting (to
the extent permitted by these By-laws and the Restated
Certificate of Incorporation of the Corporation) and no
record date for determining stockholders entitled to
express consent to corporate action in writing without a
meeting shall have been fixed, the day on which the first
written consent is expressed.
Each shareholder entitled to vote at any meeting of
stockholders may authorize not in excess of three persons
to act for such stockholder by a proxy signed by such
stockholder or such stockholder's attorney-in-fact. Any
such proxy shall be delivered to the secretary of such
meeting at or prior to the time designated for holding such
meeting, but in any event not later than the time
designated in the order of business for so delivering such
proxies. No such proxy shall be voted or acted up after
three years from its date, unless the proxy provides for a
longer period.
At each meeting of the stockholders, all corporate
actions to be taken by vote of the stockholders shall be
authorized by a majority of the votes cast by the
stockholders entitled to vote thereon, present in person or
represented by proxy, and where a separate vote by class is
required, a majority of the votes cast by the stockholders
of such class, present in person or represented by proxy,
shall be the act of such class; subject, in each case, to
such greater vote as may be prescribed by the Restated
Certificate of Incorporation of the Corporation or by law.
Unless required by law or determine by the chairman of the
meeting to be advisable, the vote on any matter, including
the election of directors, need not be by written ballot.
In the case of a vote by written ballot, each ballot shall
be signed by the stockholder voting, or by such
stockholder's proxy, and shall state the number of shares
voted.
Section 10. Inspector of Election. In advance of any
meeting of stockholders, the Board of Directors by
resolution or the Chairman shall appoint one or more
inspectors of election to act at the meeting and make a
written report thereof. One or more other persons may be
designated as alternate inspectors to replace any inspector
who fails to act. If no inspector or alternate is present,
ready and willing to act at a meeting of stockholders, the
Chairman of the meeting shall appoint one or more
inspectors to act at the meeting. Unless otherwise
required by law, inspectors may be officers, employees or
agents of the Corporation and need not be stockholders of
the Corporation. Notwithstanding anything herein to the
contrary, no director or nominee for the office of director
shall be appointed as an inspector. Each inspector, before
entering upon the discharge of his or her duties, shall
take and sign an oath faithfully to execute the duties of
inspector according to the best of his or her ability. The
inspector shall have the duties prescribed by law and shall
take charge of the polls and, when the vote is completed,
shall make a certificate of the result of the vote taken
and of such other facts as may be required by law.
ARTICLE III
Board of Directors
Section 1. General Powers. The business and affairs
of the Corporation shall be managed by or under the
direction of the Board of Directors, which may exercise all
such powers of the Corporation and do all such lawful acts
and things as are not required by law, by the Restated
Certificate of Incorporation of the Corporation or by these
By-laws directed or required to be exercised or done by the
stockholders.
Section 2. Number, Qualification and Election.
Except as otherwise provided pursuant to provisions of any
Preferred Stock Designation, the number of directors of the
Corporation shall be determined from time to time by vote
of a majority of the entire Board of Directors, provided
that the number thereof may not be less than three.
Each of the directors of the Corporation shall hold
office until the next annual meeting of stockholders
following such director's election and until such
director's successor shall have been elected and qualified,
or until his earlier death, or resignation or removal in
the manner hereinafter provided. No decrease in the number
of directors shall shorten the term of any incumbent
director.
Directors need not be stockholders of the Corporation.
In any election of directors, the persons receiving a
plurality of the votes case, up to the number of directors
to be elected in such election, shall be deemed elected.
Section 3. Notification of Nominations. Only persons
who are nominated in accordance with the following
procedures shall be eligible for election as directors of
the Corporation, except as may be otherwise provided in the
Certificate of Incorporation of the Corporation with
respect to the right of holders of preferred stock of the
Corporation to nominate and elect a specified number of
directors in certain circumstances. Nominations of persons
for election to the Board of Directors may be made at any
annual meeting of stockholders (a) by or at the direction
of the Board of Directors (or any duly authorized committee
thereof) or (b) by any stockholder of the Corporation (i)
who is a stockholder of record on the date of the giving of
the notice provided for in this Section 3 and on the record
date for the determination of stockholders entitled to vote
at such annual meeting and (ii) who complies with the
notice procedures set forth in this Section 3.
In addition to any other applicable requirements, for
a nomination to be made by a stockholder, such stockholder
must have given timely notice thereof in proper written
form to the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary
must be delivered to or mailed and received at the
principal executive offices of the Corporation not less
than sixty (60) days nor more than ninety (90) days prior
to the anniversary date of the immediately preceding annual
meeting of stockholders; provided, however, that in the
event that the annual meeting is called for a date that is
not within sixty (60) days before or after such anniversary
date, notice by the stockholder in order to be timely must
be so received not later than the close of business on the
tenth (10th) day following the date on which such notice of
the date of the annual meeting was mailed or such public
disclosure of the date of annual meeting was made,
whichever first occurs.
To be in proper written form, a stockholder's notice
to the Secretary must set forth (a) as to each person whom
the stockholder proposes to nominate for election as a
director (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or
employment of the person, (iii) the class or series and
number of shares of capital stock of the Corporation which
are owned beneficially or of record by the person, and (iv)
any other information relating to the person that would be
required to be disclosed in a proxy statement or other
filings required to be made in connection with
solicitations of proxies for election of directors pursuant
to Section 14 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations
promulgated thereunder; and (b) as to the stockholder
giving the notice (i) the name and record address of such
stockholder, (ii) the class or series and number of shares
of capital stock of the Corporation which are owned
beneficially or of record by such stockholder, (iii) a
description of all arrangements or understandings between
such stockholder and each proposed nominee and any other
person or persons (including their names) pursuant to which
the nomination(s) are to be made by such stockholder, (iv)
a representation that such stockholder intends to appear in
person or by proxy at the annual meeting to nominate the
persons named in its notice, and (v) any other information
relating to such stockholder that would be required to be
disclosed in a proxy statement or other filings required
to be made in connection with solicitations of proxies for
election of directors pursuant to Section 14 of the
Exchange Act and the rules and regulations promulgated
thereunder. Such notice must be accompanied by a written
consent of each proposed nominee to be named as a nominee
and to serve as a director if elected.
No person shall be eligible for election as a director
of the Corporation unless nominated in accordance with the
procedures set forth in this Section 3 at an annual
meeting, or unless elected by written consent of
shareholders pursuant to the procedures set forth in
Article VII, Section 6. If the Chairman of the annual
meeting determines that a nomination was not made in
accordance with the foregoing procedures, the Chairman
shall declare to the meeting that the nomination was
defective and such defective nomination shall be
disregarded.
Section 4. Quorum and Manner of Acting. Except as
otherwise provided by these By-laws, a majority of the
entire Board of Directors shall constitute a quorum for the
transaction of business at any meeting of the Board, and,
except as so provided, the vote of a majority of the
directors present at any meeting at which a quorum is
present shall be the act of the Board. In the absence of a
quorum, a majority of the directors present may adjourn the
meeting to another time and place, without notice other
than announcement at the meeting. At any adjourned meeting
at which a, quorum is present, any business may be
transacted which might have been transacted at the meeting
as originally called.
Section 5. Place of Meeting. The Board of Directors
may hold its meetings at such place or places within or
without the State of Delaware as the Board may from time to
time determine or as shall be specified or fixed in the
respective notices or waivers or notice thereof.
Section 6. Regular Meetings. Regular meetings of the
Board of Directors shall be held at such times and places
as the Board shall from time to time by resolution
determine. If any day fixed for a regular meeting shall be
a legal holiday under the laws of the place where the
meeting is to be held, the meeting which would otherwise to
be held on that day shall be held at the same hour on the
next succeeding business day.
Section 7. Special Meetings. Special meetings of the
Board of Directors shall be held whenever called by the
Chairman of the Board or by a majority of the directors.
Section 8. Notice of Meetings. Notice of regular
meetings of the Board of Directors or of any adjourned
meeting thereof need not be given. Notice of each special
meeting of the Board shall be mailed to each directors,
addressed to such director at such director's residence or
usual place of business, at least two days before the day
on which the meeting is to be held or shall be sent to such
director at such place by telegraph or be given personally
or by telephone, not later than the day before the meeting
is to be held, but notice need not be given to any director
who shall, either before or after the meeting, submit a
signed waiver of such notice or who shall attend such
meeting without protesting, prior to or at its
commencement, the lack of notice to such director. Every
such notice shall state the time and place but need not
state the purpose of the meeting.
Section 9. Rules and Regulations. The Board of
Directors may adopt such rules and regulations not
inconsistent with the provisions of these By-laws for the
conduct of its meetings and management of the affairs of
the Corporation as the Board may deem proper. In the
absence of the Chairman of the Board, such person as may be
designated by the Board of Directors shall preside at
meetings of the Board.
Section 10. Participation in Meetings by Means of
Communications Equipment. Any one or more members of the
Board of Directors or any committee thereof may participate
in any meeting of the Board or of any such committee by
means of conference telephone or similar communications
equipment by means of which all persons participating in
the meeting can hear each other, and such participation in
a meeting shall constitute presence in person at such
meeting.
Section 11. Action Without Meeting. Any action
required or permitted to be taken at any meeting of the
Board of Directors or any committee thereof may be taken
without a meeting if all of the members of the Board or of
any such committee consent thereto in writing and the
writing or writings are filed without the minutes of
proceedings of the Board or of such committee.
Section 12. Resignations. Any director of the
Corporation may at any time resign by giving written notice
to the Board of Directors, the Chairman of the Board, the
President or the Secretary of the Corporation. Such
resignation shall take effect at the time specified therein
or, if the time be not specified, upon receipt thereof,
and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it
effective. If the resignation of a director is effective
at a future time, the Board of Directors may elect a
successor prior to such effective time to take office when
such resignation becomes effective.
Section 13. Removal of Directors. Subject to the
terms of any Preferred Stock Designation, any director may
be removed at any time for cause or without cause by vote
of the holders of a majority in voting interest of shares
then entitled to vote in the election of directors. Any
director may also be removed at any time for cause by vote
of a majority of the entire Board of Directors. The
vacancy in the Board caused by any such removal may be
filled by the stockholders or as provided in Section 14 of
Article III of these By-laws.
Section 14. Vacancies. Except as otherwise provided
by the terms of any Preferred Stock Designation or any
other securities of the Corporation, newly created
directorships resulting from any increase in the number of
directors may be filled by the affirmative vote of a
majority of the Board of Directors then in office, provided
that a quorum of the Board of Directors is present, and any
vacancies on the Board of Directors resulting from death,
resignation, removal or other cause shall only be filled by
the affirmative vote of a majority of the remaining
directors then in office, even though less than a quorum of
the Board of Directors, or by a sole remaining directors,
or by the stockholders in accordance with Section 13 of
this Article III or at a meeting called for that purpose in
accordance with Section 3 of Article II of these By-laws.
The director elected to fill a vacancy shall hold office
for the unexpired term in respect of which such vacancy
occurred and until his successor shall be elected and shall
qualify or until his earlier death or resignation or
removal in the manner provided herein.
Section 15. Compensation. Each director who shall
not at the time also be a salaried officer or employee of
the Corporation or any of its subsidiaries (hereinafter
referred to as an "outside director"), in consideration of
such person serving as a director, shall be entitled to
receive from the Corporation such amount per annum and such
fees for attendance at meetings of the Board of Directors
or of committees of the Board, or both, as the Board shall
from time to time determine. In addition, each director,
whether or not an outside director, shall be entitled to
receive from the Corporation reimbursement for the
reasonable expenses incurred by such person in connection
with the performance of such person's duties as a director.
Nothing contained in this Section shall preclude any
director from serving the Corporation or any of its
subsidiaries in any other capacity and receiving proper
compensation therefor.
ARTICLE IV
Executive and Other Committees
Section 1. Executive Committee. The Board of
Directors may, by resolution adopted by a majority of the
entire Board, designate annually three or more of its
members to constitute members or alternate members of an
Executive Committee. The Board of Directors may designate
one or more directors as alternate members of the Executive
Committee, who may replace any absent or disqualified
member at any meeting of such committee. In the absence or
disqualification of a member of the Executive Committee,
and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or
disqualified member, the member or members thereof present
at any meeting and not disqualified from voting, whether or
not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the
meeting in the place of any absent or disqualified member.
The Executive Committee shall have and may exercise,
between meetings of the Board, all the powers and authority
of the Board in the management of the business and affairs
of the Corporation, including, if such Committee is so
empowered and authorized by resolution adopted by a
majority of the entire Board, the power and authority to
declare a dividend, to authorize the issuance of stock, to
adopt a certificate of ownership and merger pursuant to
Section 253 of the General Corporation Law of the State of
Delaware and may authorize the seal of the Corporation to
be affixed to all papers which may require it, except that
the Executive Committee shall not have such power or
authority in reference to:
(a) amending the Restated Certificate of Incorporation
of the Corporation;
(b) adopting an agreement of merger or consolidation
under Sections 251 or 252 of the General
Corporation Law of the State of Delaware
involving the Corporation;
(c) recommending to the stockholders the sale, lease or
exchange of all or substantially all of the
property and assets of the Corporation;
(d) recommending to the stockholders a dissolution of
the Corporation or a revocation of a dissolution;
(e) adopting, amending or repealing any By-law;
(f) filling vacancies on the Board or on any committee
of the Board, including the Executive Committee;
or
(g) amending or repealing any resolution of the Board
which by its terms may be amended or repealed
only by the Board.
The Board shall have power at any time to change the
membership of the Executive Committee, to fill all
vacancies in it and to discharge it, either with or without
cause.
Section 2. Other Committees. The Board of Directors
may, by resolution adopted by a majority of the entire
Board, designate one or more other committees, each
committee to consist of one or more of the members of this
Board and each of which committee shall have such authority
of the Board as may be specified in the resolution of the
Board designating such committee. A majority of all the
members of such committee may determine its action and fix
the time and place of its meetings, unless the Board shall
otherwise provide. The Board shall have power at any time
to change the membership of, to fill all vacancies in and
to discharge any such committee, either with or without
cause.
Section 3. Procedure; Meetings, Quorum. Regular
meetings of the Executive Committee or any other committee
of the Board of Directors, of which no notice shall be
necessary, may be held at such times and places as shall be
fixed by resolution adopted by a majority of the members
thereof. Special meetings of the Executive Committee or
any other committee of the Board shall be called at the
request of any member thereof. Notice of each special
meeting of the Executive Committee or any other committee
of the Board shall be sent by mail, telegraph or telephone,
or be delivered personally to each member thereof not later
than the day before the day on which the meeting is to be
held, but notice need not be given to any member who shall,
either before or after the meeting, submit a signed waiver
of such notice or who shall attend such meeting without
protesting, prior to or at its commencement, the lack of
such notice to such member. Any special meeting of the
Executive Committee or any other committee of the Board
shall be a legal meeting without any notice thereof having
been given, if all the members thereof shall be present
thereat. Notice of any adjourned meeting of any committee
of the Board need not be given. The Executive Committee or
any other Committee of the Board may adopt such rules and
regulations not inconsistent with the provisions of law,
the Restated Certificate of Incorporation of the
Corporation or these By-laws for the conduct of its
meetings as the Executive Committee or such other committee
of the Board may deem proper. A majority of the Executive
Committee or any other committee of the Board shall
constitute a quorum for the transaction of business at any
meeting, and the vote of a majority of the members thereof
present at any meeting at which a quorum is present shall
be the act of such committee. The Executive Committee or
any other committee of the Board of Directors shall keep
written minutes of its proceedings and shall report on such
proceedings to the Board.
ARTICLE V
Officers
Section 1. Number; Term of Office. The officers of
the Corporation shall be a Chairman of the Board, a
President, one or more Vice-Presidents, one or more of whom
may be designated as Executive, Group or Senior
Vice-Presidents, a Treasurer, a Secretary, a Controller,
and such other officers or agents with such titles and such
duties as the Board of Directors may from time to time
determine, each to have such authority, functions or duties
as in these By-laws provided or as the Board may from time
to time determine, and each to hold office for such term as
may be prescribed by the Board and until such person's
successor shall have been chosen and shall quality, or
until such person's death or resignation, or until such
person's removal in the manner hereinafter provided. The
Chairman of the Board shall be elected from among the
directors. One person may hold the offices and perform the
duties of any two or more of said officers; provided,
however, that no officer shall execute, acknowledge or
verify any instrument in more than one capacity if such
instrument is required by law, the Restated Certificate of
Incorporation of the Corporation or these By-laws to be
executed, acknowledged or verified by two or more officers.
The Board may from time to time authorize any officer to
appoint and remove any such other officers and agents and
to prescribe their powers and duties.
Section 2. Removal. Any officer may be removed,
either with or without cause, by the Board of Directors at
any meeting thereof called for the purpose, or, except in
the case of any officer elected by the Board, by any
committee or superior officer upon whom such power may be
conferred by the Board.
Section 3. Resignation. Any officer may resign at
any time by giving written notice to the Board of
Directors, the Chairman of the Board, the President or the
Secretary of the Corporation. Such resignation shall take
effect at the time specified therein or, if the time is not
specified, upon receipt thereof; and, unless otherwise
specified therein, the acceptance of such resignation shall
not be necessary to make it effective.
Section 4. Vacancies. A vacancy in any office
because of death, resignation, removal or any other cause
may be filled for the unexpired portion of the term in the
manner prescribed in these By-laws for election to such
office.
Section 5. Chairman of the Board. The Chairman of
the Board shall be the chief executive officer of the
Corporation and as such shall have general supervision and
direction of the business and affairs of the Corporation,
subject to the control of the Board of Directors. The
Chairman of the Board shall, if present, preside at
meetings of the Board of Directors and, if present, preside
at meetings of the stockholders.
Section 6. The President. The President, if any,
shall be the chief operating officer of the Corporation.
The President shall perform such other duties as the Board
may from time to time determine.
Section 7. Vice-Presidents. Each Vice-President
shall have such powers and duties as shall be prescribed by
the Chairman of the Board or the Board of Directors.
Section 8. Treasurer. The Treasurer shall perform
all duties incident to the office of Treasurer and such
other duties as from time to time may be assigned to the
Treasurer by the Chairman of the Board or the Board of
Directors.
Section 9. Secretary. The Secretary shall see that
all notices required to be given by the Corporation are
duly given and served; the Secretary shall be custodian of
the seal of the Corporation and shall affix the seal or
cause it to be affixed to all certificates of stock of the
Corporation (unless the seal of the Corporation on such
certificates shall be a facsimile, as hereinafter provided)
and to all documents, the execution of which on behalf of
the Corporation under its seal is duly authorized in
accordance with the provisions of these By-laws. The
Secretary shall have charge of the stock ledger and also of
the other books, records and papers of the Corporation and
shall see that the reports, statements and other documents
required by law are properly kept and filed; and shall in
general perform all the duties incident to the office of
Secretary and such other duties as from time to time may be
assigned to such person by the Chairman of the Board or the
Board of Directors.
Section 10. Controller. The Controller shall perform
all of the duties incident to the office of the Controller
and such other duties as may from time to time be assigned
to such person by the Chairman of the Board or the Board of
Directors.
Section 11. Assistant Treasurers, Secretaries and
Controllers. The Assistant Treasurers, the Assistant
Secretaries and the Assistant Controllers shall perform
such duties as shall be assigned to them by the Treasurer,
Secretary or Controller, respectively, or by the Chairman
of the Board or the Board of Directors.
ARTICLE VI
Indemnification of Directors, Officers,
Employees and Agents
Section 1. Third Party Actions. The Corporation
shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an
action by or in the right of the Corporation) by reason of
the fact that such person is or was a director, officer,
employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director or officer
of another corporation, partnership, joint venture, trust
or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in
connection with such action, suit or proceeding if such
person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere
or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and
in a manner which such person reasonably believed to be in
or not opposed to the best interests of the Corporation,
and, with respect to any criminal action or proceeding,
that such person had reasonable cause to believe that his
or her conduct was unlawful.
Section 2. Derivative Actions. The Corporation shall
indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that
such person is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably
incurred by such person in connection with the defense or
settlement of such action or suit if such person acted in
good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the
Corporation, except that no indemnification shall be made
in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable for negligence
or misconduct in the performance of such person's duty to
the Corporation unless and only to the extent that the
Court of Chancery of Delaware or the court in which such
action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of
all the circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses
which the Court of Chancery of Delaware or such other court
shall deem proper.
Section 3. Determination of Indemnification. Any
indemnification under Section 1 or 2 of the Article VI
(unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a
determination that indemnification of the director,
officer, employee or agent is proper in the circumstances
because such person has met the applicable standard of
conduct set forth in Section 1 or 2 of this Article VI.
Such determination shall be made (i) by the Board of
Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or
proceeding, or (ii) if such a quorum is not obtainable, or,
even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion,
or (iii) by the stockholders.
Section 4. Right to Indemnification. Notwithstanding
the other provisions of this Article VI, to the extent that
a director, officer, employee or agent of the Corporation
has been successful on the merits or otherwise in defense
of any action, suit or proceeding referred to in Section 1
or 2 of this Article VI, or in defense of any claim, issue
or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
Section 5. Advance of Expenses. Expenses incurred in
defending or investigating a threatened or pending civil or
criminal action, suit or proceeding may be paid by the
Corporation in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking
by or on behalf of the director, officer, employee or agent
to repay such amount if it shall ultimately be determined
that such person is not entitled to be indemnified by the
Corporation as authorized in this Article VI.
Section 6. Indemnification by a Court.
Notwithstanding any contrary determination in the specific
case under Section 3 of this Article VI, and
notwithstanding the absence of any determination
thereunder, any director, officer, employee or agent may
apply to any court of competent jurisdiction in the State
of Delaware for indemnification to the extent otherwise
permissible under Sections 1 and 2 of this Article VI. The
basis of such indemnification by a court shall be a
determination by such court that indemnification of the
director, officer, employee or agent is proper in the
circumstances because he has met the applicable standards
of conduct set forth in Section 1 or 2 of this Article VI,
as the case may be. Notice of any application for
indemnification pursuant to this Section 6 shall be given
to the Corporation promptly upon the filing of such
application.
Section 7. Indemnification Not Exclusive. The
indemnification and advancement of expenses provided by, or
granted pursuant to, this Article VI shall not be deemed
exclusive of any other rights to which any person seeking
indemnification or advancement of expenses may be entitled
under any law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in
such person's official capacity and as to action in another
capacity while holding such office. The provisions of this
Article VI shall not be deemed to preclude the
indemnification of any person who is not specified in
Sections 1 or 2 of this Article VI but whom the Corporation
has the power or obligation to indemnify under the
provisions of the General Corporation Law of the State of
Delaware, or otherwise.
Section 8. Insurance. The Corporation may purchase
and maintain insurance on behalf of any person who is or
was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against
such person and incurred by such person in any such
capacity, or arising out of such person's status as such,
whether or not the Corporation would have the power to
indemnify such person against such liability under the
provisions of this Article VI.
Section 9. Indemnification To Continue. The
indemnification and advancement of expenses provided by, or
granted pursuant to, this Article VI shall, unless
otherwise provided when authorized or ratified, continue as
to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such person.
Section 10. Definitions of Certain Terms. For
purposes of this Article VI, references to "the
Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation
or merger which, if its separate existence had continued,
would have had power and authority to indemnify its
directors, officers, employees or agents, so that any
person who is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at
the request of such constituent corporation as a director,
officer, employee or agent of another corporation,
partnership, joint venture, trust or another enterprise,
shall stand in the same position under the provisions of
this Article VI with respect to the resulting or surviving
corporation as such person would have with respect to such
constituent corporation if its separate existence had
continued.
For purposes of this Article VI, references to "other
enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes
assessed on a person with a respect to an employee benefit
plan; references to "serving at the request of the
Corporation" shall include any service as a director,
officer, employee or agent of the Corporation which imposes
duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan,
its participants, or beneficiaries; and a person who acted
in good faith and in a manner such person reasonably
believed to be in the interest of the participants and
beneficiaries of any employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best
interests of the Corporation" as referred to in this
Article VI.
ARTICLE VII
Capital Stock
Section 1. Certificates for Shares. Certificates
representing shares of stock of each class of the
Corporation, whenever authorized by the Board of Directors,
shall be in such form as shall be approved by the Board.
The certificates representing shares of stock of each class
shall be signed by, or in the name of, the Corporation by
the Chairman of the Board, the President or a
Vice-President and by the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer of the
Corporation, and sealed with the seal of the Corporation,
which may be a facsimile thereof. Any or all such
signatures may be facsimiles if countersigned by a transfer
agent or registrar. Although any officer, transfer agent
or registrar whose manual or facsimile signature is affixed
to such a certificate ceases to be such officer, transfer
agent or registrar before such certificate has been issued,
it may nevertheless be issued by the Corporation with the
same effect as if such officer, transfer agent or registrar
were still such at the date of its issue.
The stock ledger and blank share certificates shall be
kept by the Secretary or by a transfer agent or by a
registrar or by any other officer or agent designated by
the Board.
Section 2. Transfer of Shares. Transfers of shares
of stock of each class of the Corporation shall be made
only on the books of the Corporation by the holder thereof,
or by such holder's attorney thereunto authorized by a
power of attorney duly executed and filed with the
Secretary of the Corporation or a transfer agent for such
stock, if any, and on surrender of the certificate or
certificates for such shares properly endorsed or
accompanied by a duly executed stock transfer power and the
payment of all taxes thereon. The person in whose name
shares stand on the books of the Corporation shall be
deemed the owner thereof for all purposes as regards the
Corporation; provided, however, that whenever any transfer
of shares shall be made for collateral security and not
absolutely, and written notice thereof shall be given to
the Secretary or to such transfer agent, such fact shall be
stated in the entry of the transfer. No transfer of shares
shall be valid as against the Corporation, its stockholders
and creditors for any purpose, except to render the
transferee liable for the debts of the Corporation to the
extent provided by law, until it shall have been entered in
the stock records of the Corporation by an entry showing
from and to whom transferred.
Section 3. Addresses of Stockholders. Each
stockholder shall designate to the Secretary or transfer
agent of the Corporation an address at which notices of
meetings and all other corporate notices may be served or
mailed to such person, and, if any stockholder shall fail
to designate such address, corporate notices may be served
upon such person by mail directed to such person at such
person's post office address, if any, as the same appears
on the share record books of the Corporation or at such
person's last known post office address.
Section 4. Lost, Destroyed and Mutilated
Certificates. The holder of any share of stock of the
Corporation shall immediately notify the Corporation of any
loss, theft, destruction or mutilation of the certificate
therefor; the Corporation may issue to such holder a new
certificate or certificates for shares, upon the surrender
of the mutilated certificate or, in the case of loss, theft
or destruction of the certificate, upon satisfactory proof
of such loss, theft or destruction; the Board of Directors,
or a committee designated thereby, or the transfer agents
and registrars for the stock, may, in their discretion,
require the owner of the lost, stolen or destroyed
certificates, or such person's legal representative, to
give the Corporation a bond in such sum and with such
surety or sureties as they may direct to indemnify the
Corporation and said transfer agents and registrars against
any claim that may be made on account of the alleged loss,
theft or destruction of any such certificate the issuance
of such new certificate.
Section 5. Regulations. The Board of Directors may
make such additional rules and regulations as it may deem
expedient concerning the issue and transfer of certificates
representing shares of stock of each class of the
Corporation and may make such rules and take such action as
it may deem expedient concerning the issue of certificates
in lieu of certificates claimed to have been lost,
destroyed, stolen or mutilated.
Section 6. Fixing Date for Determination of
Stockholders of Record. In order that the corporation may
determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof,
or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or
exchange of stock or for the purpose of any other lawful
purpose, except to express consent to corporate action in
writing without a meeting, the board of directors may fix,
in advance, a record date, which shall not be more than
sixty nor less than ten days before the date of such
meeting, nor more than sixty days prior to any other
action. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however,
that the board of directors may fix a new record date for
the adjourned meeting.
In order that the corporation may determine that
stockholders are entitled to consent to corporate action in
writing without a meeting, the board of directors may fix a
record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted
by the board of directors, and which date shall not be more
than ten days after the date upon which the resolution
fixing the record date is adopted by the board of
directors. Any stockholder of record seeking to have the
stockholders authorize or take corporate action by written
consent shall, by written notice to the secretary, request
the board of directors to fix a record date. The board of
directors shall promptly, but in all events within ten days
after the date on which such a request is received adopt a
resolution fixing the record date. If no record date has
been fixed by the board of directors within ten days of the
date on which such a request is received, the record date
for determining stockholders entitled to consent to
corporate action in writing without a meeting, when no
prior action by the board of directors is required by
applicable law, shall be the first date on which a signed
written consent setting forth the action taken or proposed
to be taken is delivered to the corporation by delivery to
its registered office in the State of Delaware, its
principal place of business, or any officer or agent of the
corporation having custody of the book in which proceedings
of stockholders meetings are recorded, to the attention of
the secretary of the corporation. Delivery shall be by
hand or by certified or registered mail, return receipt
requested. If no record date has been fixed by the board
of directors and prior action by the board of directors is
required by applicable law, the record date for determining
stockholders entitled to consent to corporate action in
writing without a meeting shall be at the close of business
on the date on which the board of directors adopts the
resolution taking such prior action.
In the event of the delivery to the corporation of a
written consent or consents purporting to authorize or take
corporate action and/or related revocations (each such
written consent or related revocation is referred to in
this section as a "Consent"), the secretary of the
corporation shall provide for safekeeping of such Consent
and shall immediately appoint duly qualified and
independent inspectors to (i) conduct promptly such
reasonable ministerial review as such inspectors deem
necessary or appropriate for the purpose of ascertaining
the sufficiency and validity of such Consent and all
matters incident thereto, including, without limitation,
whether holders of shares having the requisite voting power
to authorize or take the action specified in the Consent
have given consent, and (ii) deliver to the secretary a
written report regarding the foregoing. If after such
investigation and report the secretary shall determine that
the Consent is valid, that fact shall be certified on the
records of the corporation kept for the purpose of
recording the proceedings of meetings of stockholders, and
the Consent shall be filed in such records, at which time
the Consent shall become effective as stockholder action.
ARTICLE VIII
Seal
The Board of Directors shall provide a corporate seal,
which shall be in the form of a circle and shall bear the
full name of the Corporation and such other words or
figures as the Board of Directors may approve and adopt.
The seal may be used by causing it or a facsimile thereof
to be impressed or affixed or in any other manner
reproduced.
ARTICLE IX
Fiscal Year
The fiscal year of the Corporation shall end on the
last Saturday in December each year.
ARTICLE X
Waiver of Notice
Whenever any notice whatsoever is required to be given
by these By-laws, by the Restated Certificate of
Incorporation of the Corporation or by law, the person
entitled thereto may, either before or after the meeting or
other matter in respect of which such notice is to be
given, waive such notice in writing, which writing shall be
filed with or entered upon the records of the meeting or
the records kept with respect to such other matter, as the
case may be, and in such event such notice need not be
given to such person and such waiver shall be deemed
equivalent to such notice.
ARTICLE XI
Form of By-law For
Amendment of By-laws
Section 1. Amendments. These By-laws may be altered,
amended or repealed, in whole or in part, or new By-laws
may be adopted by the stockholders or by the Board of
Directors, provided, however, that notice of such
alteration, amendment, repeal or adoption of new By-laws be
contained in the notice of such meeting of stockholders or
Board of Directors, as the case may be. All such
amendments must be approved by either the holders of a
majority of the outstanding capital stock entitled to vote
thereon or by a majority of the entire Board of Directors
then in office.
Section 2. Entire Board of Directors. As used in
this Article XI and in these By-laws generally, the term
"entire Board of Directors" means the total number of
directors (as determined from time to time by the Board of
Directors in accordance with Section 2 of Article III of
these By-laws) which the Corporation would have if there
were no vacancies.
ARTICLE XII
Miscellaneous
Section 1. Execution of Documents. The Board of
Directors or any committee thereof shall designate the
officers, employees and agents of the Corporation who shall
have power to execute and deliver deeds, contracts,
mortgages, bonds, debentures, notes, checks, drafts and
other orders for the payment of money and other documents
for and in the name of the Corporation and may authorize
such officers, employees and agents to delegate such power
(including authority to redelegate) by written instrument
to other officers, employees or agents of the Corporation.
Such delegation may be by resolution or otherwise and the
authority granted shall be general or confined to specific
matters, all as the Board or any such committee may
determine. In the absence of such designation referred to
in the first sentence of this Section, the officers of the
Corporation shall have such power so referred to, to the
extent incident to the normal performance of their duties.
Section 2. Deposits. All funds of the Corporation
not otherwise employed shall be deposited from time to time
to the credit of the Corporation or otherwise as the Board
of Directors or any committee thereof or any officer of the
Corporation to whom power in that respect shall have been
delegated by the Board or any such committee shall select.
Section 3. Checks. All checks, drafts and other
orders for the payment of money out of the funds of the
Corporation, and all notes or other evidences of
indebtedness of the Corporation, shall be signed on behalf
of the Corporation in such manner as shall from time to
time be determined by resolution of the Board of Directors
or of any committee thereof.
Section 4. Proxies in Respect of Stock or Other
Securities of Other Corporations. The Board of Directors
or any committee thereof shall designate the officers of
the Corporation who shall have authority from time to time
to appoint an agent or agents of the Corporation to
exercise in the name and on behalf of the Corporation the
powers and rights which the Corporation may have as the
holder of stock or other securities in any other
corporation, and to vote or consent in respect of such
stock or securities; such designated officers may instruct
the person or persons so appointed as to the manner of
exercising such powers and rights; and such designated
officers may execute or cause to be executed in the name
and on behalf of the Corporation and under its corporate
seal, or otherwise, such written proxies, powers of
attorney or other instruments as they may deem necessary or
proper in order that the Corporation may exercise its said
powers and rights; provided, however, that in the absence
of any such designation, the Chairman of the Board shall
exercise the rights of the Corporation hereunder.
Section 5. By-laws Subject to Law and Restated
Certificate of Incorporation of the Corporation. Each
provision of these By-laws is subject to any contrary
provision of the Restated Certificate of Incorporation of
the Corporation or of any applicable law as from time to
time in effect, and to the extent any such provision is
inconsistent therewith, such provision shall be superseded
thereby for as long as and to the extent which it is
inconsistent, but for all other purposes of these By-laws
shall continue in full force and effect.
***********************
34
28
Exhibit 10.1
REGISTRATION RIGHTS AGREEMENT
dated as of January 7, 2000
among
IBP, inc.
and
THE HOLDERS OF REGISTRABLE SECURITIES REFERRED TO HEREIN
REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement (this "Agreement") dated as
of January 7, 2000 among IBP, inc., a Delaware corporation (the
"Company"), and the Persons named on Schedule 1 as Holders (each a
"Holder" and collectively, the "Holders").
RECITALS
WHEREAS, the parties hereto hereby desire to set forth
the Holders' rights and the Company's obligations to cause the
registration of the Registerable Securities pursuant to the
Securities Act (as defined below);
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. Definitions and Usage.
As used in this Agreement:
1.1. Definitions.
Commission. "Commission" shall mean the Securities
and Exchange Commission.
Common Stock. "Common Stock" shall mean the common
stock, par value $.05 per share, of the Company.
Demand Registration. "Demand Registration" shall
have the meaning set forth in Section 2.1(i).
Demanding Holders. "Demanding Holders" shall have
the meaning set forth in Section 2.1(i).
Exchange Act. "Exchange Act" shall mean the
Securities Exchange Act of 1934.
Holder. "Holders" shall mean the Persons named on
Schedule 1 as Holders of Registerable Securities.
Majority Selling Holders. "Majority Selling
Holders" means those Selling Holders whose Registerable Securities
included in such registration represent a majority of the
Registerable Securities of all Selling Holders included therein.
Person. "Person" shall mean any individual,
corporation, partnership, joint venture, association, joint-stock
company, limited liability company, trust, unincorporated
organization or government or other agency or political subdivision
thereof.
Piggyback Registration. "Piggyback Registration"
shall have the meaning set forth in Section 3.
Register, Registered and Registration. "Register",
"registered", and "registration" shall refer to a registration
effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the
declaration or ordering by the Commission of effectiveness of such
registration statement or document.
Registerable Securities. "Registerable Securities"
shall mean: the Shares owned by Holders on the date hereof, and
owned by a Holder on the date of determination; provided, however,
that Registerable Securities shall not include any Securities which
have theretofore been registered and sold pursuant to the
Securities Act or which have been sold to the public pursuant to
Rule 144 or any similar rule promulgated by the Commission pursuant
to the Securities Act, and, provided further, the Company shall
have no obligation under Sections 2 and 3 to register any
Registerable Securities of a Holder if the Company shall deliver to
the Holders requesting such registration a written opinion of
counsel reasonably satisfactory to such Holders and its counsel to
the effect that the proposed sale or disposition of all of the
Registerable Securities for which registration was requested does
not require registration under the Securities Act for a sale or
disposition in a single public sale, and offers to remove any and
all legends restricting transfer from the certificates evidencing
such Registerable Securities.
Registerable Securities then outstanding.
"Registerable Securities then outstanding" shall mean, with respect
to a specified determination date, the Registerable Securities
owned by all Holders on such date.
Registration Expenses. "Registration Expenses"
shall have the meaning set forth in Section 6.1.
Securities Act. "Securities Act" shall mean the
Securities Act of 1933.
Selling Holders. "Selling Holders" shall mean,
with respect to a specified registration pursuant to this
Agreement, Holders whose Registerable Securities are included in
such registration.
Shares. "Shares" shall mean the shares of Common
Stock held by the Holders on the date of this Agreement.
Transfer. "Transfer" shall mean and include the
act of selling, giving, transferring, creating a trust (voting or
otherwise), assigning or otherwise disposing of (other than
pledging, hypothecating or otherwise transferring as security) (and
correlative words shall have correlative meanings); provided
however, that any transfer or other disposition upon foreclosure or
other exercise of remedies of a secured creditor after an event of
default under or with respect to a pledge, hypothecation or other
transfer as security shall constitute a "Transfer".
Underwriters' Representative. "Underwriters'
Representative" shall mean the managing underwriter, who in this
case shall be Donaldson, Lufkin & Jenrette.
Violation. "Violation" shall have the meaning set
forth in Section 7.1.
1.2. Usage.
(i) References to a Person are also references
to its assigns and successors in interest (by means of merger,
consolidation or sale of all or substantially all the assets of
such Person or otherwise, as the case may be).
(ii) References to Registerable Securities
"owned" by a Holder shall include Registerable Securities
beneficially owned by such Person but which are held of record in
the name of a nominee, trustee, custodian, or other agent, but
shall exclude shares of Common Stock held by a Holder in a
fiduciary capacity for customers of such Person.
(iii) References to a document are to it as
amended, waived and otherwise modified from time to time and
references to a statute or other governmental rule are to it as
amended and otherwise modified from time to time (and references to
any provision thereof shall include references to any successor
provision).
(iv) References to Sections or to Schedules or
Exhibits are to sections hereof or schedules or exhibits hereto,
unless the context otherwise requires.
(v) The definitions set forth herein are
equally applicable both to the singular and plural forms and the
feminine, masculine and neuter forms of the terms defined.
(vi) The term "including" and correlative terms
shall be deemed to be followed by "without limitation" whether or
not followed by such words or words of like import.
(vii) The term "hereof" and similar terms refer
to this Agreement as a whole.
(viii) The "date of" any notice or request given
pursuant to this Agreement shall be determined in accordance with
Section 12.
Section 2. Demand Registration.
2.1.
(i) On one occasion, on or after November 1, 2000;
if one or more Holders that own an aggregate of 30% or more of the
Registerable Securities then outstanding shall make a written
request to the Company (the "Demanding Holders"), the Company shall
cause there to be filed with the Commission a registration
statement meeting the requirements of the Securities Act (a "Demand
Registration"), and each Demanding Holder shall be entitled to have
included therein (subject to Section 2.5) all or such number of
such Demanding Holder's Registered Shares, as the Demanding Holder
shall report in writing; provided, however, that one (1) additional
Demand Registration may be requested by a minimum of 30% of the
remaining Registerable Securities, after the first Demand
Registration is completed or withdrawn. The second request for a
demand registration may be made pursuant to this Section 2.1 eight
(8) months after the date of the initial request for a Demand
Registration (in no event, however, will such a Demand Registration
occur in the event less than three (3) months remain before the
Shares become freely tradable). Any request made pursuant to this
Section 2.1 shall be addressed to the attention of the Secretary of
the Company, and shall specify the number of Registerable
Securities to be registered, the Holders thereof, and that the
request is for a Demand Registration pursuant to this Section
2.1(i).
(ii) The Company shall be entitled to postpone
for up to one - 60 day period, the filing of any registration
statement relating to any Demand Registration otherwise required to
be prepared and filed pursuant to this Section 2.1, if the Board
determines, in its good faith reasonable judgment (with the
concurrence of the managing underwriter, if any), that such
registration and the Transfer of Registerable Securities
contemplated thereby would materially interfere with, or require
premature disclosure of, any financing, acquisition or
reorganization involving the Company or any of its wholly owned
subsidiaries and the Company promptly gives the Demanding Holders
notice of such determination.
(iii) Whenever the Company shall have received a
demand pursuant to Section 2.1(i) to effect the registration of any
Registerable Shares, the Company shall promptly give written notice
of such proposed registration to all Holders. Any such Holder may,
within twenty (20) days after receipt of such notice, request in
writing that all of such Holder's Registerable Shares, or any
portion thereof designated by such Holder, be included in the
registration.
2.2. Following receipt of a request for a Demand
Registration, the Company shall:
(i) File the registration statement with the
Commission as promptly as practicable, and shall use the Company's
best efforts to have the registration declared effective under the
Securities Act as soon as reasonably practicable, in each instance
giving due regard to the need to prepare current financial
statements, conduct due diligence and complete other actions that
are reasonably necessary to effect a registered public offering.
(ii) Use the Company's best efforts to keep the
relevant registration statement continuously effective pursuant to
a Demand Registration, for up to 30 days or such longer period as
the Underwriters' Representative shall require to complete the
offering, such completion to be evidenced by the Underwriters'
Representative giving notice to the underlying syndicate, if any,
that the distribution is completed. Notwithstanding the foregoing,
if for any reason the effectiveness of a registration pursuant to
this Section 2 is suspended or, in the case of a Demand
Registration, postponed as permitted by Section 2.1(ii), the
foregoing period shall be extended by the aggregate number of days
of such suspension or postponement.
2.3. The Company shall be obligated to effect no
more than two Demand Registrations. For purposes of the preceding
sentence, registration shall not be deemed to have been effected
(i) unless a registration statement with respect thereto has become
effective, (ii) if after such registration statement has become
effective, such registration or the related offer, sale or
distribution of Registerable Securities thereunder is interfered
with by any stop order, injunction or other order or requirement of
the Commission or other governmental agency or court for any reason
not attributable to the Selling Holders and such interference is
not thereafter eliminated, or (iii) if the conditions to closing
specified in the underwriting agreement, if any, entered into in
connection with such registration are not satisfied or waived,
other than by reason of a failure on the part of the Selling
Holders. If the Company shall have complied with its obligations
under this Agreement, a right to demand a registration pursuant to
this Section 2 shall be deemed to have been satisfied upon the
earlier of (x) the date as of which all of the Registerable
Securities included therein (in the amount approved by the
Underwriters' Representative) shall have been disposed of pursuant
to the Registration Statement, and (y) the date as of which such
Demand Registration shall have been continuously effective for a
period of 30 days, provided no stop order or similar order, or
proceedings for such an order, is thereafter entered or initiated.
2.4. A registration pursuant to this Section 2
shall be on such appropriate registration form of the Commission as
shall (i) be selected by the Company, and (ii) permit the
disposition of the Registerable Securities in accordance with the
intended method or methods of disposition specified in the request
pursuant to Section 2.1(i).
2.5. Whenever the Company shall effect a
registration pursuant to this Section 2 in connection with an
underwritten offering by one or more Selling Holders of
Registerable Securities: if the Underwriters' Representative
advises each such Selling Holder in writing that, in its opinion,
the amount of securities requested to be included in such offering
(whether by Selling Holders or others) exceeds the amount which can
be sold in such offering without a disruption in the sale of the
Company's shares, securities shall be included in such offering and
the related registration, to the extent of the amount which can be
sold within such price range, and Holders shall each be required to
reduce, on a pro-rata basis, the number of shares offered in such
Demand Registration. Notwithstanding the foregoing, if the Company
desires to sell securities for its own account as part of such
registration, it may include a number of securities having a value
equal to not more than 30% of the total value (based on estimated
market prices) of all securities being sold pursuant to such
registration. However, the Company's share shall be reduced pro-
rata in the event the Holders are required to take a reduction as
described above.
Section 3. Piggyback Registration.
3.1. If at any time the Company proposes to
register (including for this purpose a registration effected by the
Company for shareholders of the Company other than the Holders)
securities under the Securities Act in connection with the public
offering solely for cash on Form S-1, S-2 or S-3 (or any
replacement or successor forms), the Company shall promptly give
each Holder of Registerable Securities written notice of such
registration (a "Piggyback Registration"). Upon the written
request of each Holder given within 20 days following the date of
such notice, the Company shall cause to be included in such
registration statement and use its best efforts to be registered
under the Securities Act all the Registerable Securities that each
such Holder shall have requested to be registered; provided,
however, that such right of inclusion shall not apply to any
registration statement covering an underwritten offering of
convertible debt securities. The Company shall have the absolute
right to withdraw or cease to prepare or file any registration
statement for any offering referred to in this Section 3 without
any obligation or liability to any Holder.
3.2. If the Underwriters' Representative shall
advise the Company in writing (with a copy to each Selling Holder)
that, in its opinion, the amount of Registerable Securities
requested to be included in such registration would materially
adversely affect such offering, or the timing thereof, then the
Company will include in such registration, to the extent of the
amount and class which the Company is so advised can be sold
without such material adverse effect in such offering: First, all
securities proposed to be sold by the Company for its own account;
second, the Registerable Securities requested to be included in
such registration by Holders pursuant to this Section 3, and all
other securities being registered pursuant to the exercise of
contractual rights comparable to the rights granted in this
Section 3, pro rata based on the estimated gross proceeds from the
sale thereof; and third all other securities requested to be
included in such registration.
3.3. Each Holder shall be entitled to have its
Registerable Securities included in up to two (2) Piggyback
Registrations pursuant to this Section 3.
Section 4. Registration Procedures. Whenever required
under Section 2 or Section 3 to effect the registration of any
Registerable Securities, the Company shall, as expeditiously as
practicable:
4.1. Prepare and file with the Commission a
registration statement with respect to such Registerable Securities
and use the Company's reasonable efforts to cause such registration
statement to become effective.
4.2. Prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection with such registration statement as
may be necessary to comply with the provisions of the Securities
Act and rules thereunder with respect to the disposition of all
securities covered by such registration statement. The Company
shall amend the registration statement or supplement the prospectus
whenever required by the terms of the underwriting agreement
entered into pursuant to Section 5.2. Pending such amendment or
supplement each such Holder shall cease making offers or Transfers
of Registerable Shares pursuant to the prior prospectus. In the
event that any Registerable Securities included in a registration
statement subject to, or required by, this Agreement remain unsold
at the end of the period during which the Company is obligated to
use its best efforts to maintain the effectiveness of such
registration statement, the Company may file a post-effective
amendment to the registration statement for the purpose of removing
such Securities from registered status.
4.3. Furnish to each Selling Holder of
Registerable Securities, without charge, such numbers of copies of
the registration statement, any pre-effective or post-effective
amendment thereto, the prospectus, including each preliminary
prospectus and any amendments or supplements thereto, in each case
in conformity with the requirements of the Securities Act and the
rules thereunder, and such other related documents as any such
Selling Holder may reasonably request in order to facilitate the
disposition of Registerable Securities owned by such Selling
Holder.
4.4. Use the Company's reasonable efforts (i) to
register and qualify the securities covered by such registration
statement under such other securities or Blue Sky laws of such
states or jurisdictions as shall be reasonably requested by the
Underwriters' Representative (as applicable, or if inapplicable, in
up to ten states designated by the Majority Selling Holders), and
(ii) to obtain the withdrawal of any order suspending the
effectiveness of a registration statement, or the lifting of any
suspension of the qualification (or exemption from qualification)
of the offer and transfer of any of the Registerable Securities in
any jurisdiction, at the earliest possible moment; provided,
however, that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.
4.5. Enter into and perform the Company's
obligations under an underwriting agreement (including
indemnification and contribution obligations of underwriters), in
usual and customary form, with the managing underwriter or
underwriters of such offering. The Company shall also cooperate
with the Majority Selling Holders, and the Underwriters'
Representative for such offering in the marketing of the
Registerable Shares, including making available the Company's
officers, accountants, counsel, premises, books and records for
such purpose, but the Company shall not be required to incur any
material out-of-pocket expense pursuant to this sentence.
4.6. Promptly notify each Selling Holder of (and
provide each Selling Holder of a copy of) any stop order issued or
threatened to be issued by the Commission in connection therewith
(and take all reasonable actions required to prevent the entry of
such stop order or to remove it if entered.
4.7 Prior to filing the registration statement,
furnish to one counsel selected by the holders of the Registerable
Securities copies of such documents proposed to be filed for their
review.
4.8. Make available for inspection by any
Selling Holder, any underwriter participating in such offering and
the representatives of the Underwriter, all financial and other
information as shall be reasonably requested by them, and provide
the Selling Holder, any underwriter participating in such offering
and the representatives of the Underwriter the reasonable
opportunity to discuss the business affairs of the Company with its
principal executives and independent public accountants who have
certified the audited financial statements included in such
registration statement, in each case all as necessary to enable
them to exercise their due diligence responsibility under the
Securities Act; provided, however, that information that the
Company determines, in good faith, to be confidential and which the
Company advises such Person in writing, is confidential shall not
be disclosed unless such Person signs a confidentiality agreement
reasonably satisfactory to the Company or the related Selling
Holder of Registerable Securities agrees to be responsible for such
Person's breach of confidentiality on terms reasonably satisfactory
to the Company.
4.9. Use the Company's reasonable efforts to
obtain a so-called "comfort letter" from its independent public
accountants, and legal opinions of counsel to the Company addressed
to the Selling Holders, in customary form and covering such matters
of the type customarily covered by such letters, and in a form that
shall be reasonably satisfactory to Majority Selling Holders. The
Company shall furnish to each Selling Holder a signed counterpart
of any such comfort letter or legal opinion. Delivery of any such
opinion or comfort letter shall be subject to the recipient
furnishing such written representations or acknowledgements as are
customarily provided by selling shareholders who receive such
comfort letters or opinions.
4.10. Provide and cause to be maintained a
transfer agent and registrar for all Registerable Securities
covered by such registration statement from and after a date not
later than the effective date of such registration statement.
4.11. Use reasonable efforts to cause the
Registerable Securities covered by such registration statement to
be listed on the New York Stock Exchange, or such other national
securities exchange on which the Company's shares may be
registered.
4.12. Use the Company's reasonable efforts to
provide a CUSIP number for the Registerable Securities prior to the
effective date of the first registration statement including
Registerable Securities.
4.13. Take such other actions as are reasonably
required in order to expedite or facilitate the disposition of
Registerable Securities included in each such registration.
Section 5. Holders' Obligations. It shall be a
condition precedent to the obligations of the Company to take any
action pursuant to this Agreement with respect to the Registerable
Securities of any Selling Holder of Registerable Securities that
such Selling Holder shall:
5.1. Furnish to the Company such information
regarding such Selling Holder, the number of the Registerable
Securities owned by it, and the intended method of disposition of
such securities as shall be required to effect the registration of
such Selling Holder's Registerable Securities, and to cooperate
with the Company in preparing such registration;
5.2. Agree to sell their Registerable Securities
to the underwriters at the same price and on substantially the same
terms and conditions agreed upon by the Majority Selling Holders
and the Underwriter.
Section 6. Expenses of Registration. Expenses in
connection with registrations pursuant to this Agreement shall be
allocated and paid as follows:
6.1. With respect to each Demand Registration the
Selling Holders shall bear and pay all expenses incurred up to a
maximum of $250,000 (the "Maximum Amount"), in connection with any
registration, filing, or qualification of Registerable Securities
with respect to such Demand Registrations in the proportion to the
number of shares held by each such Selling Holder and requested by
such Selling Holder to be included in such Demand Registration,
including all registration, filing and National Association of
Securities Dealers, Inc. fees, all fees and expenses of complying
with securities or blue sky laws, all word processing, duplicating
and printing expenses, messenger and delivery expenses, the
reasonable fees and disbursements of the Company's independent
public accountants, including the expenses of "cold comfort"
letters required by or incident to such performance and compliance
relating to the Registrable Securities (the"Registration
Expenses"). All Securities and Exchange Commission filing fees,
underwriting discounts and commissions relating to Registrable
Securities and the fees and disbursements of any firm of counsel
for all persons selling securities (other than Company) in such
registration statement shall be the sole responsibility of Selling
Holders, and not part of the Maximum Amount set forth in this
section. The Company shall pay only its own counsel fees and the
Registration Expenses in excess of the Maximum Amount.
6.2. The Company shall bear and pay all
Registration Expenses incurred in connection with any Piggyback
Registrations pursuant to Section 3 for each Selling Holder (which
right may be Transferred to any Person to whom Registerable
Securities are Transferred as permitted by Section 9), but
excluding underwriting discounts and commissions relating to
Registerable Securities (which shall be paid on a pro rata basis by
the Selling Holders of Registerable Securities).
Section 7. Indemnification; Contribution. If any
Registerable Securities are included in a registration statement
under this Agreement:
7.1. To the extent permitted by applicable law,
the Company shall indemnify and hold harmless each Selling Holder,
each Person, if any, who controls such Selling Holder within the
meaning of the Securities Act, and each officer, director, partner,
and employee of such Selling Holder and such controlling Person,
against any and all losses, claims, damages, liabilities and
expenses (joint or several), including attorneys' fees and
disbursements and expenses of investigation, incurred by such party
pursuant to any actual or threatened action, suit, proceeding or
investigation, or to which any of the foregoing Persons may become
subject under the Securities Act, the Exchange Act or other federal
or state laws, insofar as such losses, claims, damages, liabilities
and expenses result directly from any of the following statements,
omissions or violations (collectively a "Violation"):
(i) Any untrue statement or alleged untrue
statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus
contained therein, or any amendments or supplements thereto;
(ii) The omission or alleged omission to state
therein a material fact required to be stated therein, or necessary
to make the statements therein not misleading; or
(iii) Any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any applicable
state securities law or any rule or regulation promulgated under
the Securities Act, the Exchange Act or any applicable state
securities law;
provided, however, that the indemnification required by this
Section 7.1 shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or expense if such settlement
is effected without the consent of the Company, nor shall the
Company be liable in any such case for any such loss, claim,
damage, liability or expense to the extent that it arises out of or
is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished to the Company by the
indemnified party expressly for use in connection with such
registration; provided, further, that the indemnity agreement
contained in this Section 7 shall not apply to any underwriter to
the extent that any such loss is based on or arises out of an
untrue statement or alleged untrue statement of a material fact, or
an omission or alleged omission to state a material fact, contained
in or omitted from any preliminary prospectus if the final
prospectus shall correct such untrue statement or alleged untrue
statement, or such omission or alleged omission, and a copy of the
final prospectus has not been sent or given to such person at or
prior to the confirmation of sale to such person if such
underwriter was under an obligation to deliver such final
prospectus and failed to do so.
7.2. To the extent permitted by applicable law,
each Selling Holder shall severally indemnify and hold harmless the
Company, each of its directors, each of its officers who shall have
signed the registration statement, each Person, if any, who
controls the Company within the meaning of the Securities Act, any
other Selling Holder, any controlling Person of any such other
Selling Holder and each officer, director, partner, and employee of
such other Selling Holder and such controlling Person, against any
and all losses, claims, damages, liabilities and expenses (joint
and several), including attorneys' fees and disbursements and
expenses of investigation, incurred by such party pursuant to any
actual or threatened action, suit, proceeding or investigation, or
to which any of the foregoing Persons may otherwise become subject
under the Securities Act, the Exchange Act or other federal or
state laws, insofar as such losses, claims, damages, liabilities
and expenses arise out of or are based upon any Violation, in each
case to the extent (and only to the extent) that such Violation
occurs in reliance upon and in conformity with written information
furnished by such Selling Holder expressly for use in connection
with such registration; provided, however, that the indemnification
required by this Section 7.2 shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or expense if
settlement is effected without the consent of the relevant Selling
Holder of Registerable Securities, which consent shall not be
unreasonably withheld.
7.3. Promptly after receipt by an indemnified
party under this Section 7 of notice of the commencement of any
action, suit, proceeding, investigation or threat thereof made in
writing for which such indemnified party may make a claim under
this Section 7, such indemnified party shall deliver to the
indemnifying party a written notice of the commencement thereof and
the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any
other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the parties;
provided, however, that an indemnified party shall have the right
to retain its own counsel, with the fees and disbursements and
expenses to be paid by the indemnifying party, if representation of
such indemnified party by the counsel retained by the indemnifying
party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to
deliver written notice to the indemnifying party within a
reasonable time following the commencement of any such action, if
prejudicial to its ability to defend such action, shall relieve
such indemnifying party of any liability to the indemnified party
under this Section 7 but shall not relieve the indemnifying party
of any liability that it may have to any indemnified party
otherwise than pursuant to this Section 7. Any fees and expenses
incurred by the indemnified party (including any fees and expenses
incurred in connection with investigating or preparing to defend
such action or proceeding) shall be paid to the indemnified party,
as incurred, within thirty (30) days of written notice thereof to
the indemnifying party (regardless of whether it is ultimately
determined that an indemnified party is not entitled to
indemnification hereunder). Any such indemnified party shall have
the right to employ separate counsel in any such action, claim or
proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be the expenses of such
indemnified party unless (i) the indemnifying party has agreed to
pay such fees and expenses or (ii) the indemnifying party shall
have failed to promptly assume the defense of such action, claim or
proceeding or (iii) the named parties to any such action, claim or
proceeding (including any impleaded parties) include both such
indemnified party and the indemnifying party, and such indemnified
party shall have been advised by counsel that there may be one or
more legal defenses available to it which are different from or in
addition to those available to the indemnifying party and that the
assertion of such defenses would create a conflict of interest such
that counsel employed by the indemnifying party could not
faithfully represent the indemnified party (in which case, if such
indemnified party notifies the indemnifying party in writing that
it elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the right
to assume the defense of such action, claim or proceeding on behalf
of such indemnified party, it being understood, however, that the
indemnifying party shall not, in connection with any one such
action, claim or proceeding or separate but substantially similar
or related actions, claims or proceedings in the same jurisdiction
arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one
separate firm of attorneys (together with appropriate local
counsel) at any time for all such indemnified parties, unless in
the reasonable judgment of such indemnified party a conflict of
interest may exist between such indemnified party and any other of
such indemnified parties with respect to such action, claim or
proceeding, in which event the indemnifying party shall be
obligated to pay the fees and expenses of such additional counsel
or counsels). No indemnifying party shall be liable to an
indemnified party for any settlement of any action, proceeding or
claim without the written consent of the indemnifying party, which
consent shall not be unreasonably withheld.
7.4. If the indemnification required by this
Section 7 from the indemnifying party is unavailable to an
indemnified party hereunder in respect of any losses, claims,
damages, liabilities or expenses referred to in this Section 7:
(i) The indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such
losses, claims, damages, liabilities or expenses in such proportion
as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which
resulted in such losses, claims, damages, liabilities or expenses,
as well as any other relevant equitable considerations. The
relative fault of such indemnifying party and indemnified parties
shall be determined by reference to, among other things, whether
any Violation has been committed by, or relates to information
supplied by, such indemnifying party or indemnified parties, and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such Violation. The amount paid
or payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 7.1 and
Section 7.2, any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or
proceeding.
(ii) The parties hereto agree that it would not
be just and equitable if contribution pursuant to this Section 7.4
were determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable
considerations referred to in Section 7.4(i). No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.
7.5. If indemnification is available under this
Section 7, the indemnifying parties shall indemnify each
indemnified party to the full extent provided in this Section 7
without regard to the relative fault of such indemnifying party or
indemnified party or any other equitable consideration referred to
in Section 7.4.
7.6. The obligations of the Company and the
Selling Holders of Registerable Securities under this Section 7
shall survive the completion of any offering of Registerable
Securities pursuant to a registration statement under this
Agreement, and otherwise.
Section 8. Holdback. Each Holder entitled pursuant to
this Agreement to have Registerable Securities included in a
registration statement prepared pursuant to this Agreement, if so
requested by the Underwriters' Representative in connection with an
offering of any securities covered by a registration statement
filed by Company, whether or not Holder's securities are included
therein, shall not effect any public sale or distribution of shares
of Common Stock or any securities convertible into or exchangeable
or exercisable for shares of Common Stock, including a sale
pursuant to Rule 144 under the Securities Act (except as part of
such underwritten registration), during the 15-day period prior to,
and during the 180-day period beginning on, the date such
registration statement is declared effective under the Securities
Act by the Commission, provided that such Holder is timely notified
of such effective date in writing by the Company or such
Underwriters' Representative. In order to enforce the foregoing
covenant, the Company shall be entitled to impose stop-transfer
instructions with respect to the Registerable Securities of each
Holder that are not included in such Registration Statement until
the end of such period.
Section 9. Amendment, Modification and Waivers; Further
Assurances.
(i) This Agreement may be amended with the
consent of the Company and the Company may take any action herein
prohibited, or omit to perform any act herein required to be
performed by it, only if the Company shall have obtained the
written consent of Holders owning Registerable Securities
possessing a majority in number of the Registerable Securities then
outstanding to such amendment, action or omission to act.
(ii) No waiver of any terms or conditions of
this Agreement shall operate as a waiver of any other breach of
such terms and conditions or any other term or condition, nor shall
any failure to enforce any provision hereof operate as a waiver of
such provision or of any other provision hereof. No written waiver
hereunder, unless it by its own terms explicitly provides to the
contrary, shall be construed to effect a continuing waiver of the
provisions being waived and no such waiver in any instance shall
constitute a waiver in any other instance or for any other purpose
or impair the right of the party against whom such waiver is
claimed in all other instances or for all other purposes to require
full compliance with such provision.
(iii) Each of the parties hereto shall execute
all such further instruments and documents and take all such
further action as any other party hereto may reasonably require in
order to effectuate the terms and purposes of this Agreement.
Section 10. Assignment; Benefit. This Agreement and all
of the provisions hereof shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs,
assigns, executors, administrators or successors; provided,
however, that except as specifically provided herein with respect
to certain matters, neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned or delegated
by a Holder to any person who purchases such Registerable
Securities from the Holder, unless such transferee is an
"affiliate" of the Company within the meaning of Rule 144(a)(1)
adopted by the Commission pursuant to the Securities Act.
Section 11. Compliance with Rule 144. At the request of
any holder of Registerable Securities who proposed, in compliance
with Rule 144 of the Commission, to sell the Registerable
Securities, the Company shall forthwith furnish to such holder or
holders a written statement of compliance with the filing
requirements of the Commission, as required in such Rule (as such
Rule may be amended from time to time), or such other information
as may be required from time to time.
Section 112. Miscellaneous.
12.1 Governing Law. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF DELAWARE, WITHOUT GIVING REGARD TO THE CONFLICT OF LAWS
PRINCIPLES THEREOF.
12.2 Notices. All notices and requests given
pursuant to this Agreement shall be in writing and shall be made by
hand-delivery, first-class mail (registered or certified, return
receipt requested), confirmed facsimile or overnight air courier
guaranteeing next business day delivery to the relevant address
specified on Schedule 1 to this Agreement. Except as otherwise
provided in this Agreement, the date of each such notice and
request shall be deemed to be, and the date on which each such
notice and request shall be deemed given shall be: at the time
delivered, if personally delivered or mailed; when receipt is
acknowledged, if sent by facsimile; and the next business day after
timely delivery to the courier, if sent by overnight air courier
guaranteeing next business day delivery.
12.3 Entire Agreement; Integration. This
Agreement supersedes all prior agreements between or among any of
the parties hereto with respect to the subject matter contained
herein and therein, and such agreements embody the entire
understanding among the parties relating to such subject matter.
12.4. Injunctive Relief. Each of the parties
hereto acknowledges that in the event of a breach by any of them of
any material provision of this Agreement, the aggrieved party may
be without an adequate remedy at law. Each of the parties
therefore agrees that in the event of such a breach hereof the
aggrieved party may elect to institute and prosecute proceedings in
any court of competent jurisdiction to enforce specific performance
or to enjoin the continuing breach hereof. By seeking or obtaining
any such relief, the aggrieved party shall not be precluded from
seeking or obtaining any other relief to which it may be entitled.
12.5 Section Headings. Section headings are for
convenience of reference only and shall not affect the meaning of
any provision of this Agreement.
12.6 Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be an
original, and all of which shall together constitute one and the
same instrument. All signatures need not be on the same
counterpart.
12.7 Severability. If any provision of this
Agreement shall be invalid or unenforceable, such invalidity or
unenforceability shall not affect the validity and enforceability
of the remaining provisions of this Agreement, unless the result
thereof would be unreasonable, in which case the parties hereto
shall negotiate in good faith as to appropriate amendments hereto.
12.8 Filing. A copy of this Agreement and of
all amendments thereto shall be filed at the principal executive
office of the Company with the corporate recorder of the Company.
12.9 Termination. This Agreement may be
terminated at any time by a written instrument signed by the
parties hereto. Unless sooner terminated in accordance with the
preceding sentence, this Agreement (other than Section 7 hereof)
shall terminate in its entirety on such date as there shall be no
Registerable Securities outstanding, provided that any shares of
Common Stock previously subject to this Agreement shall not be
Registerable Securities following the sale of any such shares in an
offering registered pursuant to this Agreement.
12.10. Attorneys' Fees. In any action or
proceeding brought to enforce any provision of this Agreement, or
where any provision hereof is validly asserted as a defense, the
successful party shall be entitled to recover reasonable attorneys'
fees (including any fees incurred in any appeal) in addition to its
costs and expenses and any other available remedy.
12.11 No Third Party Beneficiaries. Nothing
herein expressed or implied is intended to confer upon any person,
other than the parties hereto or their respective permitted
assigns, successors, heirs and legal representatives, any rights,
remedies, obligations or liabilities under or by reason of this
Agreement.
12.12 Several Obligations. The obligations of
the Selling Holders hereunder shall be several, not joint.
IN WITNESS WHEREOF, this Agreement has been duly executed
by the parties hereto as of the date first written above.
5
- -14-
MANAGEMENT'S DISCUSSION AND ANALYSIS
The matters discussed herein contain forward-looking statements.
Specifically, these forward-looking statements include risks and
uncertainties. Thus, actual results may differ materially from those
expressed or implied in those statements. Those risks and
uncertainties include, without limitation, risks of changing market
conditions with regard to livestock supplies and demand for the
company's products, domestic and international legal and regulatory
risks, the costs of environmental compliance, the impact of
governmental regulations, operating efficiencies, as well as
competitive and other risks over which IBP has little or no control.
Moreover, past financial performance should not be considered a
reliable indicator of future performance. The company makes no
commitment to update any forward-looking statement, or to disclose any
facts, events or circumstances after the date hereof that may affect
the accuracy of any forward-looking statement.
RESULTS OF OPERATIONS
- ---------------------
This section presents analysis of IBP's consolidated operating
results displayed in the Consolidated Statements of Earnings and
should be read together with the business segments information in Note
M to the consolidated financial statements.
ACQUISITIONS
Early in the second quarter 1999, the company, through its
subsidiary Foodbrands America, Inc. ("Foodbrands"), acquired the
outstanding stock of two companies, H&M Food Systems Company, Inc.
("H&M") and Zemco Industries, Inc., the owner of Russer Foods. H&M is a
producer of custom-formulated pre-cooked meat products and prepared
foods with two plants in Texas. Russer Foods produces and markets a
variety of premium deli meats from a production facility in New York.
Early in the third quarter 1999, Foodbrands acquired Wilton Foods,
Inc., ("Wilton Foods") a leading producer of premium kosher meals and
prepared foods for airlines and institutions. Wilton Foods also
produces premium kosher hors d'oeuvres and appetizers.
In late August 1999, IBP, through its IBP Foods, Inc. subsidiary,
purchased substantially all of the operating assets of Thorn Apple
Valley, Inc. ("TAVI"), a further processor of pork and poultry
products, which had been involved in bankruptcy proceedings. The
purchase of the TAVI assets included five processing plants, most of
its current assets, and a number of product brand names.
A corporate realignment announced in early 2000 has brought all
former Enterprises operations, including the acquisitions described
above, under the Foodbrands America, Inc. umbrella. Consequently, the
Enterprises segment will be referred to in this report and
subsequently as the Foodbrands America segment.
On February 7, 2000, the company acquired Corporate Brand Foods
America, Inc. ("CBFA"), a privately held processor and marketer of
meat and poultry products for the retail and foodservice markets. In
the transaction, which will be accounted for as a pooling of
interests, IBP issued 14.4 million common shares for all of the
outstanding stock of CBFA. The company also assumed $316 million of
CBFA's debt and $28 million of preferred stock obligations.
COMPARISON OF 1999 TO 1998
Fresh Meats' 1999 operating margin as a percentage of net sales,
before non-recurring charges, was 3.8% compared to 2.5% in the prior
year. Both beef and pork operations performed above prior year levels
due to relatively stable livestock prices, effective levels of plant
capacity utilization, and improved domestic and export demand.
During 1999, the company incurred $35 million of non-cash, pre-tax
nonrecurring charges, including $18 million in the fourth quarter 1999.
These nonrecurring charges, which were classified in cost of products
sold, were primarily fixed asset impairment write-downs attributable to
the company's decision to exit its cow boning business. Consequently,
the cow plant assets were written down to their estimated net realizable
value.
Foodbrands America's 1999 operating earnings decreased to 5.3% of
net sales compared to 7.2% in 1998. Excluding the negative impact of
IBP Foods, the 1999 operating margin measured 6.7%. Higher 1999 raw
material and selling costs were the primary factors that reduced
margins at existing operations.
Industry experts predict that fed cattle supplies will remain
strong into the first half of 2000 before tightening somewhat, with
full year beef production down about 5%. Meanwhile, hog supplies in
2000 are expected to be down 3%-4% from 1999.
Net Sales 1999 1998 % Change
---------- ---------- ----------
Fresh Meats $12,377,723 $11,696,190 5.8%
Foodbrands America 1,697,485 1,152,445 47.3%
---------- ---------- ------
Total $14,075,208 $12,848,635 9.5%
========== ========== ======
Earnings from Operations
Fresh Meats $ 438,319 $ 291,211 50.5%
Foodbrands America 90,154 82,524 9.2%
---------- ---------- ------
Total $ 528,473 $ 373,735 41.4%
========== ========== ======
SALES
The 6% increase in Fresh Meats' 1999 net sales from 1998 was
primarily the result of increased pounds of beef products sold as well
as higher average beef selling prices. Meanwhile, Foodbrands
America's 1999 net sales increased 47% over 1998. Excluding
acquisitions, Foodbrands America's net sales increased 12% due to
sales volume increases at other existing Foodbrands America divisions.
Export sales and pounds sold increased 9% and 6% in 1999 compared
to 1998. The improvement was attributable to a 25% increase in export
sales in the second half of 1999, including 40% higher sales of
chilled and frozen beef and pork. Net export sales accounted for 12.3%
of 1999 and 1998 net sales.
Japan continues to be IBP's most significant export destination,
and 1999 export dollars were up 8% over 1998 due to a strong second
half of 1999. Although volumes were 8% below the prior year, the
sales mix has shifted to products of higher value, showing signs of a
stronger economy in the Far East. Additionally, sales to Korea were
up significantly over 1998. Closer to home, export sales to Mexico
were up 10% in 1999 versus 1998.
The U.S. Meat Export Federation predicts that U.S. red meat
exports in 2000 will increase 8% over 1999, primarily to markets in
the Far East.
COST OF PRODUCTS SOLD
Fresh Meats' cost of products sold in 1999 increased 5% over
1998. Higher live cattle prices and increased volume of Fresh Meats
products sold were the most significant factors. Plant costs were
also higher, due in part to nonrecurring charges of $35 million,
primarily cow plant asset write-downs, as mentioned earlier.
Foodbrands America's cost of products sold in 1999 versus 1998
increased 52% from 1998. The higher costs were primarily due to
acquisitions, although higher sales volume-related increases in
existing businesses were also a contributing factor.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
1999 expense increased 30% over 1998. The increases were chiefly
a result of acquisitions, higher sales volume-related selling costs,
corporate salaries, consulting expense, and a $7 million second
quarter 1998 credit for export-related harbor maintenance tax refunds.
INTEREST EXPENSE
The 5% increase in 1999 net interest expense versus 1998 was due
primarily to 18% higher average borrowings in 1999 offset somewhat by
a lower average effective interest rate (38 basis points). Average
borrowings and net interest expense will continue at higher levels in
the foreseeable future because of additional borrowings required for
the recent acquisitions and increased capital expenditures.
INCOME TAXES
IBP's effective income tax rate in 1999 decreased to 35% compared
to 38% in 1998. The 1999 rate reduction resulted from a settlement
with the Internal Revenue Service on audit issues related to fiscal
years 1989, 1990 and 1991. The settlement decreased 1999 income tax
expense by $14 million or $0.15 per diluted share.
COMPARISON OF 1998 TO 1997
Operating earnings in 1998 measured 2.9% of net sales versus 1.7%
in 1997. The Fresh Meats 1998 operating margin measured 2.5% of net
sales compared to 1.6% in 1997. The higher 1998 figure reflected
much-improved pork margins offset by lower beef margins caused by
competing domestic meat supplies and weaker export demand resulting
from economic problems in the Far East. Meanwhile, Foodbrands
America's operations performed above expectations as product demand
increased and raw material prices decreased.
Net Sales 1998 1997 % Change
---------- ---------- ----------
Fresh Meats $11,696,190 $12,421,902 -5.8%
Foodbrands America 1,152,445 836,882 37.7%
---------- ---------- ------
Total $12,848,635 $13,258,784 -3.1%
========== ========== ======
Earnings from Operations
Fresh Meats $ 291,211 $ 195,493 49.0%
Foodbrands America 82,524 31,223 164.3%
---------- ---------- ------
Total $ 373,735 $ 226,716 64.8%
========== ========== ======
SALES
The 6% decrease in Fresh Meats' net sales was due to lower
average prices of beef and pork products sold. Average 1998 pork
prices in particular fell 26% from 1997. These lower average prices
were partially offset by increases in pounds of beef and pork products
sold. Foodbrands America's net sales in 1997 included 35 weeks for
Foodbrands America, Inc. and 31 weeks for The Bruss Company.
Meanwhile, Foodbrands America's comparable period sales also decreased
in 1998 from 1997 due to lower selling prices resulting from lower raw
material costs passed through to customers, which offset an increase
in pounds sold.
Net export sales in 1998 decreased 6% from 1997. Export tonnage
in 1998 increased 21% over 1997 but was offset by overall lower prices
and a sales mix with a higher percentage of lower valued products.
Exports accounted for approximately 12.3% of consolidated net sales in
1998 versus 12.7% in 1997.
The Asian region accounted for 67% of total net export sales in
1998 compared to 73% in 1997. The decline was due to much-publicized
economic difficulties. The Far East shortfall was partially offset by
increased exports to Mexico and South America destinations.
COST OF PRODUCTS SOLD
The cost of products sold in 1998 decreased 5% from the same 1997
period. Fresh Meats experienced a 7% decrease in 1998 costs versus the
prior year. This decrease was primarily due to reduced average prices
paid for live hogs and cattle, which overrode the effect of increases
in pounds of pork and beef products sold. Fresh Meats' plant costs
increased due primarily to higher labor costs and increased pork
volume. Foodbrands America also experienced lower comparable cost of
products sold due primarily to the lower pork raw material prices.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
1998 expense was 33% higher than in 1997. Excluding the effect
of new subsidiaries, 1998 expense was 10% higher than in 1997.
Generally, higher incentive compensation and amortization of
intangibles was partially offset by accrual of refunds of U.S. harbor
maintenance taxes paid in prior years, based upon a U.S. Supreme Court
decision which ruled their collection unconstitutional, as well as
cessation of current year harbor tax expense.
Foodbrands America's selling expense is much higher as a
percentage of net sales compared to Fresh Meats due to the value-added
nature of their respective product lines which require increased
levels of customer contact, brand name development and promotional
costs. The company expects that selling expense will continue to be
significantly higher than in periods prior to the Foodbrands and Bruss
acquisitions.
INTEREST EXPENSE
The 14% higher net interest expense in 1998 versus 1997 was
primarily attributable to 29% higher average borrowings brought about
by the purchases of Foodbrands America, Inc. and The Bruss Company in
the second quarter 1997. IBP's effective interest rate in 1998 was
lower by 53 basis points from the average in 1997, which somewhat
offset the higher average borrowings. The lower effective interest
rate was attributable in part to lower short-term market rates in
1998, the retirement of Foodbrands' 10.75% Senior Subordinated Notes
in the first quarter 1998, and a favorable market position with IBP's
interest rate swap contract.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The meat processing industry is characterized by significant
working capital requirements. This is due largely to statutory
provisions that generally provide for immediate payment for livestock,
while it takes IBP on average about eight days to turn its product
inventories and eighteen days to convert its trade receivables to
cash. These factors, combined with fluctuations in production levels,
selling prices and prices paid for livestock, can impact cash
requirements substantially on a day-to-day basis. To provide cash for
its working capital requirements, the company's credit facilities
(more fully described in Note C to the consolidated financial
statements) provide IBP with same-day access to an aggregate of $600
million in potential committed borrowings. The unused portion of the
committed credit lines was $110 million at December 25, 1999.
In January 2000, the company increased its revolving credit
capacity by $300 million via a one-year facility with two major
financial institutions. Credit terms were similar to those in existing
credit facilities.
Although IBP has significant working capital requirements, its
accounts receivable and inventories are highly liquid, characterized
by rapid turnover. The following are key indicators relating to IBP's
working capital, asset-based liquidity, and leverage ratios:
December 25, December 26,
1999 1998
------------ ------------
Working capital (in
millions) $206 $231
Current ratio 1.2:1 1.3:1
Quick ratio 0.7:1 0.7:1
Number of days' sales in
accounts receivable 17.6 15.8
Inventory turnover 25.9 30.0
Earnings to fixed charges 8.0 6.1
Working capital and associated liquidity ratios at year-end 1999
slipped relative to the prior year primarily because of increased
short-term borrowings needed to fund acquisitions. Those ratios
improved in the first quarter 2000 upon issuance of the $300 million
of 7.95% 10-year notes discussed below, which reduced short-term debt
by $125 million.
Fresh Meats' accounts receivable and inventories were higher at
year-end 1999 than at year-end 1998 due primarily to higher selling
prices and livestock prices, especially on the pork side. These
higher balances contributed to slower consolidated receivables and
inventory turnover rates. In addition, the increasing presence of
value-added businesses, with their more numerous product lines and
distribution channels, and longer credit terms, has caused slower
receivables and inventory turnover rates.
Total consolidated outstanding borrowings averaged $997 million
in 1999 compared to $843 million in 1998. Borrowings outstanding at
December 25, 1999 under committed facilities totaled $490 million.
On January 31, 2000, the company issued $300 million of 7.95% 10-
year notes. The net proceeds were used to repay existing borrowings
under credit facilities.
On February 7, 2000, the company acquired Corporate Brand Foods
America, Inc. ("CBFA") in an exchange of common shares. IBP issued
14.4 million common shares for all of the outstanding stock of CBFA.
The company also assumed $316 million of CBFA's debt and $28 million
of preferred stock obligations. The debt was refinanced and the
preferred stock was liquidated immediately upon completion of the
transaction, utilizing existing IBP debt facilities.
The purchase of the Foodbrands America, Inc. 10.75% Notes in the
first quarter 1998 by IBP, inc. was funded with available credit
facilities. The portion of borrowings under IBP's revolving credit
facilities considered long-term was $175 million at year-ends 1999 and
1998.
The company invested $8 million in 1999 and $38 million in 1998
in life insurance contracts for key employees. Among other
advantages, expected changes in the cash value of these contracts are
intended to effectively act as a hedge against changes in the
company's deferred compensation liabilities.
Capital expenditures in 1999 totaled $195 million compared to
$172 million in 1998. Significant projects with 1999 spending included
beef facility food safety projects, several plant expansions, and
completion of the company's world headquarters complex. Over half of
the 1999 spending was for revenue enhancement or cost-saving projects,
while the remainder generally went toward upgrades and replacements of
existing equipment and facilities.
Management's estimate of capital spending in 2000 is in the range
of $400 million, the majority of which has been designated for revenue
enhancement and capacity expansion. The company intends to fund these
expenditures with operating cash flows and available debt facilities.
MARKET RISK
- -----------
Interest Rates - The company manages interest cost using a mix of
fixed and variable rate debt. To manage this mix in a cost-effective
manner, the company may enter into interest rate swaps in which the
company agrees to exchange, at specified intervals, the difference
between fixed and variable interest amounts calculated by reference to
an agreed-upon notional principal amount. These interest rate swaps
effectively convert a portion of the company's fixed-rate debt to
variable-rate debt or vice versa. A sensitivity analysis indicates
that, with respect to interest rate derivative instruments in place at
December 25, 1999 and December 26, 1998, a 100-basis point increase in
the applicable market interest rate would not have had a material
impact on the company's financial position, results of operations, or
liquidity.
Foreign Operations - Transactions denominated in a currency other
than the entity's functional currency are generally hedged using
currency forward contracts to reduce this market risk. These
transactions primarily involve the company's Canadian subsidiary,
which enters into currency forward and futures contracts to hedge its
exposures on receivables, live cattle, and purchase commitments in
foreign currencies. A sensitivity analysis indicates that, with
respect to currency-based derivatives in place at December 25, 1999
and December 26, 1998, a 10% change in currency exchange rates would
not have had a material impact on the company's financial position,
results of operations, or liquidity.
Commodities - The company uses commodity futures contracts to
hedge its forward livestock purchases which, in 1999, accounted for
approximately 7% of its livestock purchases. The contract lives
ranged from one to twelve months. A sensitivity analysis indicates
that, for futures contracts open at December 25, 1999, a 10% increase
in futures contract prices would increase hedging losses by $15
million. The comparable prior year figure was $13 million. Any
change in the value of the futures contracts is generally balanced by
an offsetting position in the cash market price of the delivered
livestock. Neither the company's financial position nor its liquidity
would have been materially impacted by the above increase in futures
contract prices.
YEAR 2000
- ---------
The company has an internal team responsible for assessing the
impact of Year 2000 and leading and monitoring the company's state of
readiness with respect to this issue. All planning, implementation
and testing was successfully completed before the end of 1999. The
team has continued to monitor the company's systems.
As part of the Year 2000 readiness program, significant service
providers, vendors, suppliers, customers, and governmental entities
("Key Business Partners") that were considered critical to business
operations around January 1, 2000, were identified. Steps were
initiated to reasonably ascertain their stage of Year 2000 readiness
as it related directly or indirectly to the company.
The possible consequences of the company or its Key Business
Partners not being fully Year 2000 compliant by January 1, 2000
included, among other things, temporary plant closings, delays in the
delivery of products and/or receipt of supplies, invoice and
collection errors and inventory and supply obsolescence. However,
with some very minor exceptions, the company has not suffered any
financial losses or operational inefficiencies resulting from the
calendar advancing past January 1, 2000.
The company also had in place a formal contingency plan to
address risks considered critical to operations. This contingency
plan will remain in place to ensure that any unforeseen Year 2000 or
other critical issues can be addressed appropriately.
The aggregate cost of the company's Year 2000 efforts was
approximately $14 million, virtually all of which has been spent or
committed. The spending included approximately $9 million for
computer hardware, most of which was capitalized. The remaining $5
million was primarily for changes in computer software, all of which
was expensed as incurred and funded with operating cash flows.
The company's Year 2000 readiness program has been a very
successful effort and, although continued monitoring of Business
Systems is an ongoing process, the effort is essentially complete.
The company does not anticipate any material adverse impact resulting
from unforeseen Year 2000 issues.
IBP, inc. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
December 25, December 26,
1999 1998
------------ ------------
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents $ 32,164 $ 27,254
Marketable securities - 1,400
Accounts receivable, less allowance for
doubtful accounts of $16,495 and $12,111 798,551 599,999
Inventories (Note B) 559,625 405,418
Deferred income tax benefits (Note E) 58,296 51,761
Prepaid expenses 18,293 10,983
--------- ---------
TOTAL CURRENT ASSETS 1,466,929 1,096,815
--------- ---------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land and land improvements 120,658 106,492
Buildings and stockyards 646,907 544,711
Equipment 1,287,358 1,096,571
--------- ---------
2,054,923 1,747,774
Accumulated depreciation and amortization (937,283) (843,937)
--------- ---------
1,117,640 903,837
Construction in progress 127,264 168,256
--------- ---------
1,244,904 1,072,093
--------- ---------
OTHER ASSETS:
Goodwill, net of accumulated amortization
Of $184,088 and $158,808 893,064 724,089
Other 108,342 115,099
--------- ---------
1,001,406 839,188
--------- ---------
$3,713,239 $3,008,096
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued expenses (Note D) $ 663,974 $ 565,517
Notes payable to banks (Note C) 447,960 140,967
Federal and state income taxes 139,099 152,122
Deferred income taxes (Note E) 3,361 1,818
Other 6,234 5,388
--------- ----------
TOTAL CURRENT LIABILITIES 1,260,628 865,812
--------- ----------
LONG-TERM OBLIGATIONS (Notes C and F) 586,528 575,522
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes (Note E) 31 17,037
Other 157,284 148,811
--------- ----------
157,315 165,848
--------- ----------
COMMITMENTS AND CONTINGENCIES (Notes N and O)
STOCKHOLDERS' EQUITY (Note G):
Preferred stock, authorized 25,000,000
shares; none issued
Common stock, $.05 par value per share;
authorized 200,000,000 shares;
issued 95,000,000 shares 4,750 4,750
Additional paid-in capital 400,177 405,278
Retained earnings 1,371,756 1,067,725
Accumulated other comprehensive income (8,600) (16,456)
Treasury stock, at cost, 2,634,268
and 2,686,188 shares (59,315) (60,383)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 1,708,768 1,400,914
--------- ---------
$3,713,239 $3,008,096
========= =========
See notes to consolidated financial statements.
IBP, inc. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
52 Weeks Ended
------------------------------------------------------
December 25, December 26, December 27,
1999 1998 1997
-------------- -------------- -------------
Net sales (Note A) $14,075,208 $12,848,635 $13,258,784
Cost of products sold 13,172,961 12,186,427 12,815,892
---------- ---------- ----------
Gross profit 902,247 662,208 442,892
Selling, general and
administrative expense 373,774 288,473 216,176
---------- ---------- ----------
Earnings from operations 528,473 373,735 226,716
Interest:
Incurred (59,585) (55,653) (50,001)
Capitalized 8,589 7,976 6,933
Income 5,584 4,464 5,066
---------- ---------- ----------
(45,412) (43,213) (38,002)
---------- ---------- ----------
Earnings before income taxes
and extraordinary item 483,061 330,522 188,714
Income taxes (Note E) 169,800 125,700 71,700
---------- ---------- ----------
Earnings before extraordinary
item 313,261 204,822 117,014
Extraordinary loss on early
extinguishment of debt,
less applicable taxes
(Note F) - (14,815) -
---------- ---------- ----------
Net earnings $ 313,261 $ 190,007 $ 117,014
========== ========== ==========
Earnings per share (Note K):
- ----------------------------
Earnings before
extraordinary item $3.39 $2.21 $1.26
Extraordinary item - (.16) -
---- ---- ----
Net earnings $3.39 $2.05 $1.26
==== ==== ====
Earnings per share - assuming dilution:
- ---------------------------------------
Earnings before extraordinary
item $3.36 $2.19 $1.25
Extraordinary item - (.16) -
---- ---- ----
Net earnings $3.36 $2.03 $1.25
==== ==== ====
See notes to consolidated financial statements.
<TABLE>
IBP, inc. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
(in thousands, except per share data)
Accumulated
Additional Other
Common Paid-in Retained Comprehensive Treasury
Total Stock Capital Earnings Income Stock
------- ------- ------------ --------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 28, 1996 $1,203,655 $ 4,750 $ 427,456 $ 779,199 $ (32) $ (7,718)
---------
Comprehensive income:
Net earnings 117,014 117,014
Other comprehensive income:
Foreign currency
translation adjustments (6,082) (6,082)
---------
Comprehensive income 110,932
---------
Dividends declared on common
stock, $.10 per share (9,249) (9,249)
Treasury shares purchased (73,915) (73,915)
Treasury shares delivered under
employee stock plans 5,646 (20,504) 26,150
--------- ------ -------- --------- --------- -------
Balances, December 27, 1997 1,237,069 4,750 406,952 886,964 (6,114) (55,483)
---------
Comprehensive income:
Net earnings 190,007 190,007
Other comprehensive income:
Foreign currency
translation adjustments (10,342) (10,342)
---------
Comprehensive income 179,665
---------
Dividends declared on common
stock, $.10 per share (9,246) (9,246)
Treasury shares purchased (12,370) (12,370)
Treasury shares delivered under
employee stock plans 5,796 (1,674) 7,470
--------- ------ -------- --------- --------- -------
Balances, December 26, 1998 1,400,914 4,750 405,278 1,067,725 (16,456) (60,383)
---------
Comprehensive income:
Net earnings 313,261 313,261
Other comprehensive income:
Foreign currency
translation adjustments 7,856 7,856
--------
Comprehensive income 321,117
--------
Dividends declared on common
stock, $.10 per share (9,230) (9,230)
Treasury shares purchased (6,170) (6,170)
Treasury shares delivered under
employee stock plans 2,137 (5,101) 7,238
--------- ------ -------- --------- --------- -------
Balances, December 25, 1999 $1,708,768 $ 4,750 $ 400,177 $1,371,756 $ (8,600) $(59,315)
========= ====== ======== ========= ========== =======
</TABLE>
See notes to consolidated financial statements.
<TABLE>
IBP, inc. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
52 Weeks Ended
------------------------------------------
December 25, December 26, December 27,
1999 1998 1997
------------ ------------ ------------
Inflows (outflows)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 313,261 $ 190,007 $ 117,014
--------- --------- ---------
Adjustments to reconcile net earnings
to cash flows from operations:
Depreciation and amortization 113,508 100,821 92,292
Amortization of intangible assets 26,544 25,405 17,638
Fixed assets impairment write-downs 29,351 - -
Deferred income tax (benefit) provision (2,450) (5,300) 1,175
Extraordinary loss on extinguishment
of debt - 14,815 -
Working capital changes, net of
effects of acquisitions:
Accounts receivable (157,549) (32,070) (16,069)
Inventories (101,068) (13,773) (11,761)
Accounts payable and accrued
liabilities 43,626 71,936 (21,901)
Other adjustments, net 22,432 8,989 9,529
--------- --------- ---------
(25,606) 170,823 70,903
--------- --------- ---------
Net cash flows provided by
operating activities 287,655 360,830 187,917
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (396,612) (73,580) (324,891)
Capital expenditures (194,853) (172,112) (133,925)
Proceeds from disposals of marketable
securities 20,800 257,721 403,723
Purchases of marketable securities (19,400) (250,954) (237,243)
Investment in life insurance contracts (7,759) (38,000) (4,000)
Other investing activities, net (148) (2,051) 9,855
--------- --------- ---------
Net cash flows used in investing
activities (597,972) (278,976) (286,481)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in short-term debt 307,000 11,000 238,500
Net change in checks in process of
clearance 20,576 (29,464) (7,715)
Purchase of treasury stock (6,170) (12,370) (73,915)
Principal payments on long-term
obligations (3,777) (114,371) (212,054)
Proceeds from issuance of long-term debt 2,992 49,773 132,187
Premiums paid on early retirement of
debt - (20,636) -
Other financing activities, net (7,092) (6,006) (2,835)
--------- --------- ---------
Net cash flows provided by (used in)
financing activities 313,529 (122,074) 74,168
--------- --------- ---------
Effect of exchange rate on cash and
cash equivalents 1,698 (1,548) (746)
--------- --------- ---------
Net change in cash and cash equivalents 4,910 (41,768) (25,142)
Cash and cash equivalents at beginning
of year 27,254 69,022 94,164
--------- --------- ---------
Cash and cash equivalents at end of year $ 32,164 $ 27,254 $ 69,022
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
IBP, inc. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEARS ENDED DECEMBER 25, 1999, DECEMBER 26, 1998
-------------------------------------------------------
AND DECEMBER 27, 1997
---------------------
Columnar amounts in thousands, except share and per share amounts
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------
PRINCIPLES OF CONSOLIDATION - All subsidiaries are wholly-owned and
are consolidated in the accompanying financial statements. All material
intercompany balances, transactions and profits have been eliminated.
MANAGEMENT'S USE OF ESTIMATES - The preparation of financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the dates of the financial statements and the
reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
FISCAL YEAR - IBP's fiscal year ends on the last Saturday of the
calendar year. Fiscal years 1999, 1998 and 1997 all consisted of 52
weeks.
EXPORT SALES - In 1999, 1998 and 1997, net export sales, principally
to customers in Asia and also to destinations in the Americas and Europe,
amounted to $1.7 billion, $1.6 billion and $1.7 billion, respectively.
STATEMENT OF CASH FLOWS - For purposes of the statement of cash
flows, management considers all highly liquid debt instruments purchased
with original maturities of three months or less to be cash equivalents.
Such investments are carried at cost, which approximates fair value.
DERIVATIVE INSTRUMENTS - To manage interest rate and currency
exposures, the company uses interest rate swaps and currency forward
contracts. IBP specifically designates interest rate swaps as hedges of
debt instruments and recognizes interest differentials as adjustments to
interest expense in the period they occur. Gains and losses related to
foreign currency hedges of firmly committed transactions are deferred and
are recognized in income when the hedged transaction occurs.
To manage its commodity exposures, the company uses commodity
futures, options and forward contracts. These instruments are used
primarily in forward purchases of livestock and, to a lesser extent,
forward sales of products. The company accounts for these instruments as
hedges of specific lots of livestock or sales and any gain or loss is not
recognized until the hedged transaction occurs.
Livestock hedging gains or losses are included in cost of products
sold while forward sales hedging transactions are recorded in net sales.
Cash flows related to derivative financial instruments are classified in
the statement of cash flows in a manner consistent with those of
transactions being hedged.
MARKETABLE SECURITIES - Marketable securities are classified as
available for sale, are highly liquid and are purchased and sold on a
short-term basis as part of IBP's management of working capital. Such
securities consist of auction market preferred stock, which management
does not intend to hold more than one year, and tax-exempt securities and
commercial paper with maturities of less than one year. Marketable
securities are carried at cost, which approximates fair value.
INVENTORIES - Inventories are valued on the basis of the lower of
first-in, first-out cost or market.
PROPERTY, PLANT AND EQUIPMENT - Depreciation is provided for
property, plant and equipment on the straight-line method over the
estimated useful lives of the respective classes of assets as follows:
Land improvements..................8 to 20 years
Buildings and stockyards..........10 to 40 years
Equipment..........................3 to 12 years
Leasehold improvements, included in the equipment class, are
amortized over the life of the lease or the life of the asset, whichever
is shorter.
GOODWILL - Goodwill is amortized on a straight-line basis generally
over 40 years.
IMPAIRMENT OF LONG-LIVED ASSETS - The company reviews the carrying
value of its long-lived assets (including goodwill) for impairment
whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. Measurement of any impairment is based on
estimated future undiscounted cash flows attributable to the assets. In
the event such cash flows are not expected to be sufficient to recover
the carrying value of the assets, the assets are written down to their
estimated fair values. During 1999, the company wrote down $30 million
of impaired long-lived assets, including $15 million in the fourth
quarter 1999. These write-downs, which were classified in cost of
products sold, were primarily attributable to the company's decision to
exit its cow boning business.
FOREIGN CURRENCY TRANSLATION - The translation of foreign currency
into U.S. dollars is performed for balance sheet accounts using the
current exchange rate in effect at the balance sheet date and for revenue
and expense accounts using the average exchange rate during the period.
The gains or losses resulting from translation are included in
stockholders' equity. Exchange adjustments resulting from foreign
currency transactions, which were not material in any of the years
presented, are generally recognized in net earnings.
ACCOUNTING CHANGES - In June 1999, Statement of Financial
Accounting Standard ("SFAS") No. 137 was issued, which deferred the
effective date for SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities" and is effective no later than the first quarter
of fiscal 2001. Based upon the company's current level of derivatives
activity, management expects that this standard will not materially
affect the company's financial position or results of operations.
COMPREHENSIVE INCOME - Comprehensive income consists of net
earnings and foreign currency translation adjustments. Management
considers its foreign investments to be permanent in nature and does not
provide for taxes on currency translation adjustments arising from
converting the investment in a foreign currency to U.S. dollars. There
are no reclassification adjustments to be reported in the periods
presented.
RECLASSIFICATIONS - Certain reclassifications have been made to prior
financial statements to conform to the current year presentation.
B. INVENTORIES:
------------
Inventories are comprised of the following:
December 25, December 26,
1999 1998
------------ ------------
Product inventories:
Raw materials $ 37,846 $ 22,552
Work in process 83,638 69,790
Finished goods 214,272 148,542
------- -------
335,756 240,884
Livestock 137,300 89,321
Supplies 86,569 75,213
------- -------
$559,625 $405,418
======= =======
C. CREDIT ARRANGEMENTS:
--------------------
At December 25, 1999, IBP had in place two committed revolving
credit facilities totaling $600 million in potential borrowings. These
facilities include a $500 million multi-year credit facility (the "Multi-
Year Facility") and a $100 million revolving promissory note (the
"Promissory Note"). From time to time, IBP also may use uncommitted lines
of credit for some or all of its short-term borrowing needs.
The Multi-Year Facility is a revolving facility with a maturity date
of December 20, 2000. Facility fees can vary from .085 to .200 of 1% on
the total amount of the facility. The Promissory Note was extended on May
1, 1999 and matures on April 30, 2000.
In January 2000, the company increased its revolving credit
capacity by $300 million via a one-year facility with two major
financial institutions. Credit terms are similar to those in existing
credit facilities.
There were total borrowings of $490 million outstanding under the
revolving facilities at December 25, 1999, $315 million of which was
classified as current liabilities. IBP also had $133 million of short-
term borrowings outstanding at year-end 1999 under uncommitted credit
lines. The remaining $175 million under revolving facilities was
classified as non-current in the consolidated balance sheet. The
interest rate at December 25, 1999 on the non-current portion was 6.3%.
During fiscal 1999, the maximum amount of borrowings under all of
IBP's credit arrangements, including any amounts considered non-current,
was $764 million. Average borrowings under IBP's credit arrangements and
the weighted average interest rate during fiscal 1999 were $584 million
and 5.4%. The comparable 1998 figures were average borrowings of $423
million and an average interest rate of 5.8%.
IBP's credit facility agreements contain certain restrictive
covenants which, among other things, (1) require the maintenance of a
minimum debt service coverage ratio; and (2) provide for a maximum funded
debt ratio.
D. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
--------------------------------------
Accounts payable and accrued expenses are comprised of the
following:
December 25, December 26,
1999 1998
------------ ------------
Accounts payable, principally
trade creditors $273,271 $220,972
------- -------
Checks in process of clearance 115,768 94,888
------- -------
Accrued expenses:
Employee compensation 86,091 74,728
Employee benefits 44,997 34,771
Property and other taxes 25,364 24,809
Marketing costs 19,230 14,352
Other 99,253 100,997
------- -------
274,935 249,657
------- -------
$663,974 $565,517
======= =======
E. INCOME TAXES:
-------------
Income tax expense consists of the following:
1999 1998 1997
-------- -------- --------
Current:
Federal $148,150 $118,260 $ 72,000
State 21,000 13,380 3,825
Foreign 3,100 (640) (5,300)
------- ------- -------
172,250 131,000 70,525
------- ------- -------
Deferred:
Federal (4,975) (5,630) 3,100
State (100) 480 300
Foreign 2,625 (150) (2,225)
------- ------- -------
(2,450) (5,300) 1,175
------- ------- -------
$169,800 $125,700 $ 71,700
======= ======= =======
Total income tax expense varies from the amount which would be
provided by applying the U.S. federal income tax rate to earnings before
income taxes. The major reasons for this difference (expressed as a
percentage of pre-tax earnings) are as follows:
1999 1998 1997
-------- -------- --------
Federal income tax rate 35.0% 35.0% 35.0%
State income taxes, net
of federal benefit 2.8 2.9 1.7
Settlement of federal
audit issues (2.8) - -
Foreign tax items (1.6) (1.3) (1.9)
Goodwill amortization 1.4 1.8 2.5
Other, net 0.4 (0.4) 0.7
---- ---- ----
35.2% 38.0% 38.0%
==== ==== ====
Management reached a settlement with the U.S. Internal Revenue
Service ("IRS") on audit issues related to fiscal years 1989, 1990 and
1991. The IRS is currently examining the years 1992 through 1996. In
management's opinion, adequate provisions for income taxes have been made
for all years.
Deferred income tax liabilities and assets were comprised of the
following:
December 25, December 26,
1999 1998
------------ ------------
Deferred tax assets:
Nondeductible accrued liabilities $ 102,375 $ 95,085
State tax credit carryforwards 9,140 8,543
Bad debt and claims reserves 5,699 4,372
Federal and state operating
loss carryforwards 31,969 20,874
Other 3,989 2,987
--------- ---------
Gross deferred tax assets 153,172 131,861
Valuation allowance (9,140) (8,543)
--------- ---------
Net deferred tax assets 144,032 123,318
--------- ---------
Deferred tax liabilities:
Fixed assets (69,737) (75,107)
Intangible assets (15,544) (11,445)
Other (3,847) (3,860)
--------- ---------
(89,128) (90,412)
--------- ---------
$ 54,904 $ 32,906
========= =========
The net $0.6 million increase in the valuation allowance for deferred
tax assets was the result of net state tax credits earned. No benefit
has been recognized for these state tax credit carryforwards, most of
which expire in the years 2004 through 2008.
At December 25, 1999, after considering utilization restrictions,
the company's acquired tax loss carryforwards approximated $93.8
million, including $48 million acquired in the purchase of H&M Food
Systems Company, Inc. (see note L). The net operating loss
carryforwards, which are subject to utilization limitations due to
ownership changes, may be utilized to offset future taxable income as
follows: $20.6 million each in 2000, 2001, 2002 and 2003 and $11.4
million in 2004. Loss carryforwards not utilized in the first year that
they are available may be carried over and utilized in subsequent years,
subject to their expiration provisions. These carryforwards expire
during the years 2005 through 2019.
F. LONG-TERM OBLIGATIONS:
----------------------
Long-term obligations are summarized as follows:
December 25, December 26,
1999 1998
------------ ------------
Revolving credit facilities $ 175,000 $ 175,000
7.45% Senior Notes due 2007 125,000 125,000
6.125% Senior Notes due 2006 100,000 100,000
7.125% Senior Notes due 2026 100,000 100,000
6.0% Securities due 2001 50,000 50,000
Present value of minimum
capital lease obligations 26,728 27,526
Other 13,725 1,076
--------- ---------
590,453 578,602
Less amounts due within one year 3,925 3,080
--------- ---------
$ 586,528 $ 575,522
========= =========
On January 31, 2000, the company issued $300 million of 7.95% 10-
year notes under its $550 million Debt Securities program originally
registered with the Securities and Exchange Commission ("SEC") in 1996.
This Debt Securities program was subsequently amended and filed with the
SEC on January 27, 2000. The net proceeds, issued at a slight discount
to par, were used to repay existing borrowings under revolving credit
facilities. Interest is payable semiannually.
During the first quarter 1998, the company completed its purchase of
all of the $112 million outstanding 10.75% Senior Subordinated Notes of
its wholly-owned subsidiary, Foodbrands America, Inc. ("Foodbrands").
Net prepayment premiums, accelerated amortization of unamortized
deferred financing costs, and transaction expenses totaled $24 million,
before applicable income tax benefit of $9 million, and was accounted
for as an extraordinary loss.
The purchase of the Foodbrands obligations by IBP was funded with
available credit facilities. The portion of borrowings under IBP's
revolving credit facilities considered long-term was $175 million at
December 25, 1999 and December 26, 1998.
Substantially all of the leased assets under capital leases can be
purchased by IBP at the end of the respective lease terms. Leased
assets, which are included with owned property in the consolidated
balance sheets, at cost totaled $32 million; accumulated amortization on
these assets totaled $12 million.
Aggregate maturities of long-term obligations for each of the five
fiscal years subsequent to 1999 are (in millions): $179.0; $55.0; $3.2;
$2.3 and $3.8.
G. STOCK PLANS:
------------
Officer Long-Term Stock Plans:
------------------------------
IBP has officer long-term stock plans which provide for awards to
key officers of IBP which, subject to certain restrictions, will vest
generally after five years resulting in the delivery of shares of common
stock over the one-year period following such vesting. At December 25,
1999, there were approximately 607,000 shares available for future
awards under the plans. The company recognized compensation expense for
these plans totaling $3.1 million, $2.3 million and $3.3 million,
respectively, in 1999, 1998 and 1997.
The status of shares under the officer long-term stock plans is
summarized as follows:
Number of Weighted Average
Shares Price per Share
------------------------------
Balance, December 28, 1996 1,342.2 $11.13
Granted 290.6 21.11
Delivered (1,020.0) 8.41
Forfeited (10.2) 18.36
------------------------------
Balance, December 27, 1997 602.6 20.48
Granted 48.8 23.94
Delivered - -
Forfeited (9.3) 21.48
------------------------------
Balance, December 26, 1998 642.1 20.54
Granted 61.7 22.49
Delivered (86.9) 15.12
Forfeited (6.9) 25.38
------------------------------
Balance, December 25, 1999 610.0 $21.84
------------------------------
Stock Option Plans:
- -------------------
IBP has stock option plans under which incentive and non-qualified
stock options may be granted to key employees and directors of IBP and
its subsidiaries. As of December 25, 1999, the plans provided for the
delivery of up to 7.1 million shares of common stock upon exercise of
options granted at no less than the market value of the shares on the
effective date of grant. An additional 0.4 million options granted in
1998 were non-qualified ("non-qualifying options") based upon differences
in market price on the effective date and issuance date. The expense
recorded for the non-qualifying options was not material in 1999 or 1998.
All options may be granted for terms up to but not exceeding ten
years and are generally fully vested after five years from the date
granted. At December 25, 1999 and December 26, 1998, there were 2.7
million and 3.2 million options, respectively, reserved for future
grants.
The company follows the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"). Accordingly, no compensation cost has
been recognized for the stock option plans under that standard. Had
compensation cost for IBP's stock option plans been determined based on
the fair value at the grant date for awards in 1999, 1998, and 1997
consistent with the provisions of SFAS No. 123, IBP's net earnings and
earnings per share would have been reduced to the pro forma amounts
indicated below:
1999 1998 1997
-------- -------- --------
Net earnings - as reported $313,261 $190,007 $117,014
Net earnings - pro forma 309,717 187,088 114,236
Earnings per share - as reported 3.39 2.05 1.26
Earnings per share - pro forma 3.36 2.02 1.23
Earnings per diluted share -
as reported 3.36 2.03 1.25
Earnings per diluted share -
pro forma 3.32 2.00 1.22
The weighted average fair values at date of grant for options granted at
market value during 1999, 1998 and 1997 were $7.53, $7.29 and $7.91 per
option respectively. The weighted-average fair value for the non-
qualifying options granted in 1998 was $13.15 per option. The fair value
of each option was estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions for
options granted in 1999, 1998 and 1997:
1999 1998 1997
-------- -------- --------
Expected option life 6 years 6 years 6 years
Expected annual volatility 26% 26% 26%
Risk-free interest rate 5.8% 4.7% 5.8%
Dividend yield 0.4% 0.4% 0.4%
The status of stock options under the plans is summarized as follows:
Number of Weighted Average Options
Shares Price Per Share Exercisable
------------- -------------------- ---------------
Balance at
December 28, 1996 4,549.9 $16.09 1,721.0
Granted 658.2 21.63
Exercised (738.5) 8.78
Canceled (344.4) 21.25
- ----------------------------------------------------------------------------
Balance at
December 27, 1997 4,125.2 17.85 1,846.3
Granted at market
value 208.7 21.37
Granted at a price
below market value 434.2 16.56
Exercised (320.1) 11.44
Canceled (199.4) 21.64
- ----------------------------------------------------------------------------
Balance at
December 26, 1998 4,248.6 18.20 2,230.9
Granted 651.0 20.63
Exercised (290.9) 10.64
Canceled (179.0) 21.65
- ----------------------------------------------------------------------------
Balance at
December 25, 1999 4,429.7 $18.92 2,543.7
The following table summarizes information about stock options
outstanding at December 25, 1999:
Number Weighted Average
Range of Outstanding Remaining Weighted Average
Exercisable Prices At 12/25/99 Contractual Life Exercise Price
- ------------------ --------------- ------------------- ------------------
$ 6.75 to 15.99 994.2 2.9 years $10.84
16.00 to 25.99 3,335.7 6.9 years 21.06
26.00 to 33.00 99.8 7.0 years 28.11
- -----------------------------------------------------------------------------
$ 6.75 to 33.00 4,429.7 6.3 years $18.92
Number
Range of Exercisable Weighted Average
Exercisable Prices At 12/25/99 Exercise Price
---------------------- --------------- --------------------
$ 6.75 to 15.99 971.1 $10.73
16.00 to 25.99 1,529.2 21.77
26.00 to 33.00 43.4 28.33
-----------------------------------------------------------
$ 6.75 to 33.00 2,543.7 $17.65
Share Delivery Restrictions:
----------------------------
Shares of common stock to be delivered for approximately 0.6 million
options under the stock option plans must come from previously issued
shares. All other shares of stock to be delivered pursuant to the stock
option plans and the officer long-term stock plans may alternatively come
from previously authorized but unissued common stock.
H. SUPPLEMENTAL CASH FLOW INFORMATION:
-----------------------------------
Supplemental information on cash payments is presented as follows:
1999 1998 1997
---------- ---------- ----------
Interest, net of amounts
capitalized $ 47,906 $ 47,775 $ 37,670
Income taxes 193,721 74,343 39,017
I. FINANCIAL INSTRUMENTS:
----------------------
Interest and Currency Rate Derivatives:
---------------------------------------
The company's policy is to manage interest cost using a mix of fixed
and variable rate debt. To manage this mix in a cost-effective manner,
the company may enter into interest rate swaps in which the company
agrees to exchange, at specified intervals, the difference between fixed
and variable interest amounts calculated by reference to an agreed-upon
notional principal amount. These interest rate swaps effectively convert
a portion of the company's fixed-rate debt to variable-rate debt, or vice
versa.
The notional amounts of these swap agreements were $50 million at
year-ends 1999 and 1998. The notional amounts of these and other
derivative instruments do not represent assets or liabilities of the
company but, rather, are the basis for the settlements under the contract
terms.
The company's Canadian subsidiary enters into currency futures
contracts to hedge its exposures on receivables, live cattle and purchase
commitments in foreign currencies. At December 25, 1999, the company had
outstanding contracts to buy Canadian dollars totaling CDN$96 million at
various dates through 2000. Comparable outstanding contracts at year-end
1998 totaled CDN$130 million. The company also had outstanding contracts
at year-end 1999 to sell $20 million U.S. dollars at various dates.
There were no such contracts outstanding at year-end 1998.
There were no material realized or unrealized gains or losses for
any derivative financial instruments in any of the fiscal years
presented. The company monitors the risk of default by its financial
instrument counterparties, all of which are major financial institutions,
and does not anticipate nonperformance.
Fair Value of Financial Instruments:
------------------------------------
The following methods and assumptions are used in estimating the
fair value of each class of the company's financial instruments at
December 25, 1999:
For cash equivalents, marketable securities, accounts receivable,
notes payable and accounts payable, the carrying amount is a reasonable
estimate of fair value because of the short-term nature of these
instruments.
For securities included in other assets, fair value is based upon
quoted market prices for these or similar securities. The carrying
amount approximates fair value for these securities. Life insurance
contracts are carried at fair value.
For long-term debt, fair value was determined using valuation
techniques that considered cash flows discounted at current market rates
and management's best estimate for instruments without quoted market
prices. At year-end 1999, the carrying value exceeded the fair value by
$25 million. At year-end 1998, the fair value exceeded the carrying
value by $6 million. The company's long-term debt is generally not
callable until maturity, except for the 7.125% Senior Notes due 2026.
For derivatives, the fair value was estimated using termination cash
values. The fair values of IBP's derivatives at year-ends 1999 and 1998
were not material.
J. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS:
-----------------------------------------------
IBP's subsidiary, Foodbrands America, Inc. ("Foodbrands"), has
defined benefit pension plans at three of its facilities. Foodbrands also
provides life insurance and medical benefits for substantially all
retired hourly and salaried employees of one of its subsidiaries under
various defined benefit plans.
Pension Benefits Other Benefits
---------------------- ----------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
Change in benefit obligation:
Benefit obligation at beginning
of year $ 70,921 $ 68,933 $ 68,851 $ 69,410
Service cost 568 473 221 229
Interest cost 4,690 4,787 4,452 4,799
Actuarial (gain) loss (3,979) 3,117 (4,634) 666
Benefits paid (6,284) (6,389) (5,938) (6,253)
------- ------- ------- -------
Benefit obligation at end of year 65,916 70,921 62,952 68,851
------- ------- ------- -------
Change in plan assets:
Fair value of plan assets at
beginning of year 66,737 65,110 5 9
Actual return on plan assets 9,378 5,165 1 -
Employer contribution 188 2,851 5,954 6,249
Benefits paid (6,284) (6,389) (5,938) (6,253)
------- ------- ------- -------
Fair value of plan assets at end
of year 70,019 66,737 22 5
------- ------- ------- -------
Funded status 4,103 (4,184) (62,930) (68,846)
Unrecognized net actuarial (gain)
loss (3,967) 3,812 (3,064) 1,587
------- ------- ------- -------
Net amount recognized $ 136 $( 372) $(65,994) $(67,259)
======= ======= ======= =======
Amounts recognized in the statement
of financial position consist of:
Prepaid benefit cost $ 1,040 $ 1,046 $ - $ -
Accrued benefit liability (904) ( 1,418) (65,994) (67,259)
------- ------- ------- -------
Net amount recognized $ 136 $( 372) $(65,994) $(67,259)
======= ======= ======= =======
Weighted-average assumptions as
of year end:
Discount rate 7.75% 6.75% 7.75% 6.75%
Expected return on plan assets 8.50% 8.50% n/a n/a
For measurement purposes, a 9.2% annual rate of increase in the per
capita claims cost of covered health care benefits was assumed for 1999.
The rate was assumed to decrease gradually to 8.7% by 2001, 7.5% by 2006,
and 6.5% by 2011 and remain at that level thereafter.
Components of net periodic benefit cost:
Pension benefits:
1999 1998 1997
-------- -------- --------
Service cost $ 568 $ 473 $ 411
Interest cost 4,690 4,787 4,956
Expected return on plan assets (5,578) (5,501) (4,993)
------- ------- -------
Net periodic (benefit) cost $ (320) $( 241) $ 374
======= ======= =======
Other benefits:
1999 1998 1997
-------- -------- --------
Service cost $ 221 $ 229 $ 197
Interest cost 4,452 4,799 5,018
Expected return on plan assets - (1) (2)
------- ------- -------
Net periodic cost $ 4,673 $ 5,027 $ 5,213
======= ======= =======
Assumed health care cost trend rates have a significant effect on
the amounts reported for the health care plan. A one-percentage-point
change in assumed health care cost trend rates would have the following
effects:
1-percentage- 1-percentage-
Point Increase Point Decrease
---------------- ----------------
Effect on total of service and
interest cost components for 1999 $ 117 $ (45)
Effect on year-end postretirement
benefit obligation $ 923 $ (898)
K. EARNINGS PER SHARE:
-------------------
For the Year Ended December 25, 1999
------------------------------------------
Earnings Shares Per Share
(Numerator) (Denominator) Amount
------------------------------------------
Basic EPS
- ---------
Net earnings $313,261 92,298 $3.39
====
Effect of Dilutive Securities
- -----------------------------
Employee stock plans - 992
------- ------
Diluted EPS $313,261 93,290 $3.36
======= ====== ====
For the Year Ended December 26, 1998
------------------------------------------
Earnings Shares Per Share
(Numerator) (Denominator) Amount
------------------------------------------
Basic EPS
- ---------
Earning before extraordinary
item $204,822 92,485 $2.21
====
Effect of Dilutive Securities
- -----------------------------
Employee stock plans - 910
------- ------
Diluted EPS $204,822 93,395 $2.19
======= ====== ====
For the Year Ended December 27, 1997
------------------------------------------
Earnings Shares Per Share
(Numerator) (Denominator) Amount
------------------------------------------
Basic EPS
- ---------
Net earnings $117,014 92,651 $1.26
====
Effect of Dilutive Securities
- -----------------------------
Employee stock plans - 1,141
------- ------
Diluted EPS $117,014 93,792 $1.25
======= ====== ====
The summary below lists stock options outstanding at the end of the
fiscal years which were not included in the computations of diluted EPS
because the options' exercise price was greater than the average market
price of the common shares. These options had varying expiration dates.
1999 1998 1997
---------- ---------- ----------
Stock options excluded from
Diluted EPS computation 1,552 120 1,406
Average option price per share $24.72 $27.28 $24.95
L. ACQUISITIONS:
-------------
1999 Acquisitions
-----------------
Early in the second quarter 1999, the company acquired the
outstanding stock of two companies, H&M Food Systems Company, Inc.
("H&M") and Zemco Industries, Inc., the owner of Russer Foods. H&M is a
producer of custom-formulated pre-cooked meat products and prepared
foods with two plants in Texas. Russer Foods, based in Buffalo, New
York, produces and markets a variety of premium deli meats. Both
operations will operate as part of IBP's Foodbrands America, Inc.
("Foodbrands") subsidiary.
Early in the third quarter 1999, Foodbrands acquired Wilton Foods,
Inc., ("Wilton Foods") a leading producer of premium kosher meals and
prepared foods for airlines and institutions. Wilton Foods, based in
Goshen, New York, also produces premium kosher hors d'oeuvres and
appetizers.
In the third quarter 1999, IBP, through its IBP Foods, Inc.
subsidiary, purchased substantially all of the operating assets of Thorn
Apple Valley, Inc. ("TAVI"), a further processor of pork and poultry
products, which had been involved in bankruptcy proceedings. The
purchase of the TAVI assets included five processing plants, most of its
current assets and a number of product brand names.
All of the acquisitions above were accounted for as purchase
business combinations. Approximately $194 million of goodwill was
recorded with these acquisitions and is being amortized on a straight-
line basis over 40 years.
The following pro forma financial information assumes the above
businesses were acquired at the beginning of 1998. These results have
been prepared for comparative purposes only and do not purport to be
indicative of what would have occurred had the assets been acquired at
the beginning of 1998, or of the results which may occur in the future.
The pro forma results do not include TAVI's discontinued fresh pork
operation which IBP did not purchase. However, the pro forma results do
include significant TAVI nonrecurring charges related to goodwill and
asset impairments, Russian credit losses, product recalls and
bankruptcy-related legal and financing expenses.
52 Weeks Ended
------------------------------
Dec. 25, Dec. 26,
1999 1998
-------------- --------------
(unaudited)
Net sales $14,396,046 $13,618,468
Earnings from operations 474,180 402,158
Earnings before extraordinary item 240,915 209,501
Net earnings 240,915 194,686
Earnings per diluted share:
Earnings before extraordinary item $2.58 $2.24
Net earnings 2.58 2.08
Corporate Brand Foods America
-----------------------------
On February 7, 2000, the company acquired Corporate Brand Foods
America, Inc. ("CBFA"), a privately held processor and marketer of meat
and poultry products for the retail and foodservice markets. In the
transaction, which will be accounted for as a pooling of interests, IBP
issued 14.4 million common shares for all of the outstanding stock of
CBFA. The company also assumed $344 million of CBFA's debt and preferred
stock obligations.
IBP had product sales to CBFA in IBP's fiscal years ended December
25, 1999 and December 26, 1998, totaling $63 million and $64 million,
respectively. The effects of conforming CBFA's accounting policies to
those of IBP are not expected to be material.
Prior to the merger, CBFA's fiscal year ended on the Sunday closest
to the last day of February. The following information presents certain
statement of earnings data of CBFA for the periods preceding the merger:
Twelve Months Fiscal Year Fiscal Year
Ended Ended Ended
December 25, 1999 February 28, 1999 March 1, 1998
------------------- ------------------- -----------------
(unaudited)
Net sales $634,932 $515,888 $272,935
EBITDA(1) 47,341 33,943 18,134
Net earnings 4,098 2,531 3,134
(1)Earnings before interest, taxes, depreciation and amortization
M. BUSINESS SEGMENTS:
------------------
The company is managed and operated as two divisions, Fresh Meats
and Foodbrands America (formerly described as Enterprises), and,
accordingly, has two business segments. IBP's Fresh Meats operation
relates principally to the meat processing industry and primarily
involves cattle and hog slaughter, beef and pork fabrication and related
allied product processing activities. This segment markets its products
to food retailers, distributors, wholesalers, restaurant and hotel
chains, other food processors and leather makers, as well as
manufacturers of pharmaceuticals and animal feeds. The Foodbrands
America segment consists of three IBP subsidiaries: Foodbrands America,
Inc., The Bruss Company and IBP Foods, Inc. The Foodbrands America group
produces, markets and distributes a variety of frozen and refrigerated
products to the "away from home" food preparation market, including pizza
toppings and crusts, value-added pork-based products, ethnic specialty
foods, appetizers, soups, sauces and side dishes as well as deli meats
and processed beef, pork and poultry products. Foodbrands America also
produces portion-controlled premium beef and pork products for sale to
restaurants and foodservice customers in domestic and international
markets. The company operates principally in the United States.
Intersegment sales have been recorded at amounts approximating
market. Earnings from operations are comprised of net sales less all
identifiable operating expenses, allocated corporate selling, general and
administrative expenses, and goodwill amortization. Net interest expense
and income taxes have been excluded from segment operations.
<TABLE>
NET SALES 1999 1998 1997
- --------- -------------- -------------- --------------
<S> <C> <C> <C>
Sales to unaffiliated customers:
Fresh Meats $ 12,377,723 $ 11,696,190 $ 12,421,902
Foodbrands America 1,697,485 1,152,445 836,882
----------- ----------- -----------
$ 14,075,208 $ 12,848,635 $ 13,258,784
=========== =========== ===========
Intersegment sales:
Fresh Meats $ 284,058 $ 185,459 $ 148,224
Intersegment elimination (284,058) (185,459) (148,224)
----------- ----------- -----------
$ - $ - $ -
=========== =========== ===========
Net sales:
Fresh Meats $ 12,661,781 $ 11,881,649 $ 12,570,126
Foodbrands America 1,697,485 1,152,445 836,882
Intersegment elimination (284,058) (185,459) (148,224)
----------- ----------- -----------
$ 14,075,208 $ 12,848,635 $ 13,258,784
=========== =========== ===========
EARNINGS FROM OPERATIONS
- ------------------------
Fresh Meats $ 438,319 $ 291,211 $ 195,493
Foodbrands America 90,154 82,524 31,223
----------- ----------- -----------
Total earnings from operations 528,473 373,735 226,716
Net interest expense (45,412) (43,213) (38,002)
----------- ----------- -----------
Pre-tax earnings $ 483,061 $ 330,522 $ 188,714
=========== =========== ===========
TOTAL ASSETS
- ------------
Fresh Meats $ 2,182,511 $ 1,989,674 $ 1,923,517
Foodbrands America 1,530,728 1,018,422 915,424
----------- ----------- -----------
$ 3,713,239 $ 3,008,096 $ 2,838,941
=========== =========== ===========
ADDITIONS TO PROPERTY, PLANT
AND EQUIPMENT, INCLUDING ACQUISITIONS
- --------------------------------------
Fresh Meats $ 111,361 $ 123,179 $ 107,503
Foodbrands America 480,104 122,513 351,313
----------- ----------- -----------
$ 591,465 $ 245,692 $ 458,816
=========== =========== ===========
DEPRECIATION AND AMORTIZATION
- -----------------------------
Of fixed assets:
Fresh Meats $ 75,678 $ 74,034 $ 74,282
Foodbrands America 37,830 26,787 18,010
----------- ----------- -----------
$ 113,508 $ 100,821 $ 92,292
=========== =========== ===========
Of intangible assets:
Fresh Meats $ 8,557 $ 12,295 $ 8,944
Foodbrands America 17,987 13,110 8,694
----------- ----------- -----------
$ 26,544 $ 25,405 $ 17,638
=========== =========== ===========
NET SALES BY GEOGRAPHIC LOCATION OF CUSTOMERS
- ---------------------------------------------
1999 1998 1997
-------------- -------------- --------------
United States $11,916,663 $10,952,780 $11,167,708
Japan 845,150 784,624 909,855
Canada 510,801 421,701 508,568
Korea 224,131 134,271 224,272
Mexico 190,627 173,074 125,533
Other foreign countries 387,836 382,185 322,848
----------- ----------- -----------
$14,075,208 $12,848,635 $13,258,784
=========== =========== ===========
</TABLE>
N. COMMITMENTS:
------------
The company leases various facilities and equipment under
noncancelable operating lease arrangements which expire at various dates
through the year 2012. Future minimum payments under noncancelable
operating leases with lease terms in excess of one year at December 25,
1999 totaled approximately $68 million. Aggregate maturities for each of
the five fiscal years subsequent to 1999 are (in millions) $17.5; $10.1;
$7.1; $5.2; and $4.4. The company's rental expense for all operating
leases was (in millions) $25.2; $21.9; and $15.9 for fiscal years 1999,
1998 and 1997.
The company had livestock and other purchase commitments, letters of
credit, and other commitments and guarantees at December 25, 1999
aggregating approximately $302 million. Livestock purchase commitments
were at a market or market-derived price at the time of delivery or were
fully hedged if the price was determined at an earlier date.
In addition to the livestock purchase commitments above, the company
is committed to purchase approximately 24 million market hogs between
2000 and 2009 at market-derived prices under various contracts with
producers. Contractual commitments for the next five years average
approximately 4.6 million hogs annually, which represents approximately
21% of IBP's current annual production capacity.
O. 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 future consolidated
results of operations, financial position or liquidity.
In July 1996, a lawsuit was filed against IBP by certain cattle
producers in the U.S. District Court, Middle District of Alabama,
seeking certification of a class of all cattle producers. The complaint
alleges that IBP has used its market power and alleged "captive supply"
agreements to reduce the prices paid to producers for cattle.
Plaintiffs have disclosed that, in addition to declaratory relief, they
seek actual and punitive damages, although plaintiffs have not specified
the amounts they seek. The original motion for class certification was
denied by the District Court; plaintiffs then amended their motion,
defining a narrower class consisting of only those cattle producers who
sold cattle directly to IBP from 1994 through the date of certification.
While the District Court approved this narrower class in April 1999, the
Court noted that it could decertify the class as discovery proceeds.
The 11th Circuit granted IBP's request for a review of the class
certification decision, and is expected to issue an opinion in early
2000. Management continues to believe that the company has acted
properly and lawfully in its dealings with cattle producers.
On January 12, 2000, The United States Department of Justice, on
behalf of the Environmental Protection Agency ("EPA"), filed a lawsuit
against IBP in U. S. District Court for the District of Nebraska,
alleging violations of various environmental laws at IBP's Dakota City
facility. This action alleges, among other things, violations of: (1)
the Clean Air Act; (2) the Clean Water Act; (3) the Resource,
Conservation and Recovery Act; (4) the Comprehensive Environmental
Response Compensation and Liability Act ("CERCLA"); and (5) the
Emergency Planning and Community Right to Know Act ("EPCRA"). The
action seeks injunctive relief to remedy alleged violations and damages
of $25,000 per violation per day for alleged violations which occurred
prior to January 30, 1997, and $27,500 per violation per day for alleged
violations after that date. The Complaint alleges that some violations
began to occur as early as 1989, although the great majority of the
violations are alleged to have occurred much later, and continue into
the present. IBP believes that the company has meritorious defenses on
each of these allegations and intends to aggressively defend these
claims.
The EPA has also sent IBP an information request under the Clean
Air Act and CERCLA seeking additional information regarding hydrogen
sulfide emissions from the company's Dakota City facility. The EPA
claims it seeks information to determine whether the emissions pose an
imminent and substantial endangerment to human health or the
environment. If the EPA makes this finding, it could trigger further
action including an administrative order for compliance concerning the
facility. IBP disputes and would vigorously contest any claim that the
emissions pose any such threat.
P. QUARTERLY FINANCIAL DATA (UNAUDITED):
-------------------------------------
Quarterly results are summarized as follows:
First Second Third Fourth
1999 Quarter Quarter Quarter Quarter Annual
- ---- ----------- ----------- ----------- ----------- ----------
Net sales $3,097,652 $3,478,467 $3,648,390 $3,850,699 $14,075,208
Gross profit 179,148 208,034 263,631 251,434 902,247
Net earnings 56,898 66,243 108,606 81,514 313,261
Earnings per share .62 .72 1.18 .88 3.39
Earnings per diluted
share .61 .71 1.16 .87 3.36
Dividends per share .025 .025 .025 .025 .10
Market price:
High 29 3/16 23 1/8 25 3/4 25
Low 19 3/8 16 3/4 22 17 3/4
1998
- ----
Net sales $3,224,944 $3,334,340 $3,210,689 $3,078,662 $12,848,635
Gross profit 103,829 126,141 193,251 238,987 662,208
Earnings before
extraordinary item 13,599 33,853 65,581 91,789 204,822
Net earnings (loss) (1,216) 33,853 65,581 91,789 190,007
Earnings per share:
Earnings before
extraordinary item .15 .37 .71 .99 2.21
Net earnings (loss) (.01) .37 .71 .99 2.05
Earnings per diluted
share:
Earnings before
extraordinary item .15 .36 .70 .98 2.19
Net earnings (loss) (.01) .36 .70 .98 2.03
Dividends per share .025 .025 .025 .025 .10
Market price:
High 24 1/2 23 1/8 21 1/8 29 7/16
Low 19 15/16 18 3/8 19 9/16 20
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Stockholders of IBP, inc.
In our opinion, the accompanying consolidated balance sheets and
the related consolidated statements of earnings, changes in
stockholders' equity and comprehensive income, and of cash flows present
fairly, in all material respects, the consolidated financial position of
IBP, inc. and subsidiaries at December 25, 1999 and December 26, 1998,
and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 25, 1999, in
conformity with accounting principles generally accepted in the United
States. These financial statements are the responsibility of the
company's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits
of these statements in accordance with auditing standards generally
accepted in the United States which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Omaha, Nebraska
February 7, 2000
REPORT ON FINANCIAL STATEMENT INTEGRITY BY MANAGEMENT
-----------------------------------------------------
To our Stockholders:
IBP's consolidated financial statements have been prepared by
management and we are responsible for their integrity and objectivity.
The accompanying consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United
States. We believe these statements present fairly the company's
financial position and results of operations.
Our independent auditors, PricewaterhouseCoopers LLP, have audited
these consolidated financial statements. Their audit was conducted using
auditing standards generally accepted in the United States, which
included consideration of our internal controls in order to form an
independent opinion on the financial statements. We have made available
to PricewaterhouseCoopers LLP, all the company's financial records, as
well as the minutes of all meetings of stockholders, directors and
committees of directors.
IBP relies on a system of internal accounting controls to provide
assurance that assets are safeguarded and transactions are properly
authorized and recorded. We continually monitor these controls, modifying
and improving them as business operations change. IBP maintains a strong
internal auditing department that independently reviews and evaluates
these controls as well.
The Audit Committee of the Board of Directors provides oversight to
ensure the integrity and objectivity of the company's financial reporting
process and the independence of our internal and external auditors. Both
internal audit and PricewaterhouseCoopers LLP, have complete access to
the Board's Audit Committee with or without the presence of management
personnel.
Our management team is responsible for proactively fostering a strong
climate of ethical conduct so that the company's affairs are carried out
according to the highest standards of personal and corporate behavior.
This responsibility is specifically demonstrated in IBP's conflict of
interest policy which requires annual written acknowledgment by each and
every officer and those management personnel so designated.
We are pleased to present this annual report and the accompanying
consolidated financial statements for your review and consideration.
Most sincerely,
/s/ Robert L. Peterson /s/ Larry Shipley
- -------------------------------- -----------------------------
Robert L. Peterson Larry Shipley
Chairman and Chief Executive Officer Chief Financial Officer
IBP, inc. IBP, inc.
EXHIBIT 21
SUBSIDIARIES OF IBP, inc.
December 25, 1999
Foodbrands America, Inc., Delaware
IBP Foodservice, L.L.C., Delaware*
* Owns 100% interest in Foodbrands America, Inc.
Consent of Independent Accountants
We consent to the incorporation by reference in the
registration statement of IBP, inc. on Form S-3
(File No. 33-64459) and on Form S-8 (File No. 33-
19441) of our report dated February 7, 2000, on our
audits of the consolidated financial statements and
financial statement schedule of IBP, inc. as of
December 25, 1999 and December 26, 1998 and for each
of the three years ended December 25, 1999, which
report is incorporated by reference in the Annual
Report on Form 10-K.
PricewaterhouseCoopers LLP
Omaha, Nebraska
March 23, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-25-1999
<PERIOD-END> DEC-25-1999
<CASH> 32
<SECURITIES> 0
<RECEIVABLES> 815
<ALLOWANCES> 16
<INVENTORY> 560
<CURRENT-ASSETS> 1,467
<PP&E> 2,182
<DEPRECIATION> 937
<TOTAL-ASSETS> 3,713
<CURRENT-LIABILITIES> 1,261
<BONDS> 587
0
0
<COMMON> 5
<OTHER-SE> 1,704
<TOTAL-LIABILITY-AND-EQUITY> 3,713
<SALES> 14,075
<TOTAL-REVENUES> 14,075
<CGS> 13,173
<TOTAL-COSTS> 13,173
<OTHER-EXPENSES> 374
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45
<INCOME-PRETAX> 483
<INCOME-TAX> 170
<INCOME-CONTINUING> 313
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 313
<EPS-BASIC> 3.39
<EPS-DILUTED> 3.36
</TABLE>
