010241 IBP Sets Charge as Part of SEC Probe

Dakota Dunes, SD - Beef processor IBP Inc., which poultry giant Tyson Foods Inc. is in the process of buying, said it will take a one- time charge of up to $108 million for its DFG unit, an acquisition that federal regulators are investigating.

The company also warned it may take additional charges as part of the Securities and Exchange Commission probe, which includes its 1998 acquisition of DFG, a Chicago-based maker of hors d'oeuvres and appetizers, and other issues.

The developments were the latest actions taken by IBP as it sorts through accounting practices. Tyson, which has agreed to buy IBP for $3.2 billion in cash and stock, has delayed the acquisition while the investigation is continuing.

The SEC as a matter of policy does not comment on ongoing investigations.

Some industry experts have speculated the issues at IBP could prompt Tyson to renegotiate the deal, which values the company at $30 a share. Tyson, which has said it would not complete the tender offer or begin an exchange offer until the matter is resolved, on Wednesday extended the tender offer until Feb. 28.

IBP stock was up 24 cents at $26.96 in midday New York Stock Exchange trade, while Tyson was off 4 cents at $12.67.

IBP said it is finalizing amendments to filings made to the SEC about the DFG acquisition and its accounting of stock options.

The company said it expects to file the changes with the SEC “as promptly as possible” and take a write-down of DFG assets that will result in a noncash one-time charge of up to $108 million before taxes for 2000, which the company said “may or may not affect previously reported results.”

New accounting standards as well as possible charges related to executive stock options may further affect results, IBP said.

An IBP spokesman said the statement was not a response to comments made on Wednesday by Tyson Chairman John Tyson, who expressed frustration with delays in his company's planned acquisition and said IBP had not provided data connected to the SEC probe.

IBP said it has provided Tyson with all pertinent information. It also said it is investigating the causes and responsible parties that led to the irregularities at DFG, and will seek restitution.

“We are determined to get to the bottom of the problems at DFG and take whatever actions are appropriate and necessary in response to issues uncovered in our investigation,” the company said in a statement. “After completing the investigation, IBP will pursue all parties responsible for the misrepresentations and inaccuracies identified.”

The revisions affect IBP's fiscal year ended Dec. 25, 1999, and quarterly reports for the 13 weeks ended March 25, 2000, the 26 weeks ended June 24, 2000 and the 39 weeks ended Sept. 23, 2000, as well as the 8-K report dated Nov. 3, 2000.

The changes reflect adjustments related mostly to inventory, accounts receivable and accrued liabilities resulting from irregularities at DFG, IBP said. The company also said it will take a charge of $44.9 million, or 26 cents a diluted share, for those changes, down from the $47 million it said on Jan. 26 the charge might be.

The $44.9 million cash charge consists of a $15.5 million charge to fourth quarter 1999, an aggregate of $17.4 million in charges to the first three quarters of 2000 and a $12 million charge to fourth quarter 2000, IBP said.

The company also said the revisions apply to its accounting for options granted to executives from 1993 to 2000 to acquire about 2 million shares of its stock.

The result is a noncash charge or credit to the compensation expense portion of the company's selling, general and administrative expenses in the affected periods. The company is still calculating the dollar impact.

IBP said there are other revisions to its business-segment information that won't affect financial results.

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