Selected Financial Data                                                      
        
(in thousands except per share data)



                                      Fiscal Year Ended                       
                  December     December    December    December   December   
                     28,          30,         31,         25,         26,     
                    1996         1995        1994(1)     1993        1992   
OPERATIONS:
 Net sales      $12,538,753 $12,667,562 $12,075,427 $11,671,397 $11,128,405
 Gross profit       443,203     604,068     460,109     258,666     236,791
 Selling,            
  general and
  administrative
  expense           120,295     123,972     112,772      84,197      76,349
 Earnings from
  operations        322,908     480,096     347,337     174,469     160,442
 Interest expense,
  net                (3,373)    (20,784)    (38,448)    (43,212)    (51,826)
 Earnings before  
  income taxes,
  extraordinary
  item and           
  accounting 
  change            319,535     459,312     308,889     131,257     108,616
 Income taxes       120,800     179,200     126,600      53,800      45,000
 Extraordinary
  loss (2)             -        (22,189)       -           -           -
 Accounting 
  change (3)           -           -           -         12,626        -
 Net earnings       198,735     257,923     182,289      90,083      63,616
 
PER SHARE DATA:
 Earnings per 
  share:
  Earnings before
   extraordinary
   item and       
   accounting    
   change             $2.06       $2.90       $1.90       $ .81       $ .67
  Extraordinary loss    -          (.23)        -           -           -
  Accounting change     -           -           -           .13         -
  Net earnings         2.06        2.67        1.90         .94         .67 
 Dividends per share    .10         .10         .10         .10         .15

FINANCIAL CONDITION:
 Working capital $  506,454  $  427,241  $  359,238  $  336,668  $  329,727
 Total assets     2,174,495   2,027,601   1,865,463   1,538,907   1,499,427
 Long-term 
  obligations       260,008     260,752     361,760     460,723     510,900
 Stockholders' 
  equity          1,203,655   1,022,939     780,494     612,796     534,077


(1)  53-week year.
(2)  Extraordinary loss on early extinguishment of debt.
(3)  Cumulative effect of change in accounting for income taxes.


                            IBP, inc. AND SUBSIDIARIES            
                            CONSOLIDATED BALANCE SHEETS     
                 (In thousands except share and per share data)

                                                  December 28,  December 30,
                                                      1996          1995   
ASSETS                                            -----------   ----------- 
CURRENT ASSETS:
  Cash and cash equivalents                        $   94,164    $  116,277
  Marketable securities                               169,476        63,851
  Accounts receivable, less allowance for          
    doubtful accounts of $9,873 and $9,494            500,781       529,796
  Inventories (Note B)                                299,700       303,711
  Deferred income tax benefits (Note E)                42,364        51,482
  Prepaid expenses                                      4,100         3,773
                                                    ---------     ---------
    TOTAL CURRENT ASSETS                            1,110,585     1,068,890
PROPERTY, PLANT AND EQUIPMENT, at cost (Note F):
  Land and land improvements                           99,765        95,217
  Buildings and stockyards                            385,328       374,988
  Equipment                                           860,712       802,466
                                                    ---------     ---------
                                                    1,345,805     1,272,671
  Less accumulated depreciation                      (697,510)     (632,666)
                                                    ---------     ---------
                                                      648,295       640,005
  Construction in progress                            167,911        86,854
                                                    ---------     ---------
                                                      816,206       726,859
OTHER ASSETS:
  Goodwill, net of accumulated amortization
    of $121,644 and $113,301                          206,587       208,434
  Other                                                41,117        23,418
                                                    ---------     ---------
                                                      247,704       231,852
                                                    ---------     ---------
                                                   $2,174,495    $2,027,601
LIABILITIES AND STOCKHOLDERS' EQUITY                =========     =========
CURRENT LIABILITIES:
  Accounts payable and accrued expenses (Note D)   $  509,520    $  548,934
  Federal and state income taxes                       83,484        81,817
  Deferred income taxes (Note E)                        8,115         7,916
  Other                                                 3,012         2,982
                                                    ---------     ---------    
    TOTAL CURRENT LIABILITIES                         604,131       641,649
LONG-TERM OBLIGATIONS (Notes C and F)                 260,008       260,752
DEFERRED CREDITS AND OTHER LIABILITIES:
  Deferred income taxes (Note E)                       68,026        69,079
  Other                                                38,675        33,182
                                                    ---------     ---------
                                                      106,701       102,261
COMMITMENTS AND CONTINGENCIES (Note J)
STOCKHOLDERS' EQUITY (Note G):
  Preferred stock, 25,000,000 shares
    authorized; 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                          427,456       432,726
  Retained earnings                                   779,199       589,936
  Currency translation adjustments                        (32)          116 
  Treasury stock at cost, 372,780 and 253,252  
    shares                                             (7,718)       (4,589)
                                                    ---------     ---------
    TOTAL STOCKHOLDERS' EQUITY                      1,203,655     1,022,939
                                                    ---------     ---------
                                                   $2,174,495    $2,027,601 
                                                    =========     =========
See notes to consolidated financial statements.   

                                   -1-

                                   IBP, inc. AND SUBSIDIARIES             
                               CONSOLIDATED STATEMENTS OF EARNINGS
                              (In thousands except per share data)



                                                                  53 Weeks  
                                        52 Weeks Ended             Ended
                                December 28,    December 30,    December 31,  
                                    1996            1995            1994     
                                -----------     -----------     -----------

   Net sales (Note A)           $12,538,753     $12,667,562     $12,075,427
   Cost of products sold         12,095,550      12,063,494      11,615,318
                                 ----------      ----------      ----------
   Gross profit                     443,203         604,068         460,109

   Selling, general and
     administrative expense         120,295         123,972         112,772
                                 ----------      ----------      ----------
   Earnings from operations         322,908         480,096         347,337

   Interest:
     Incurred                       (19,536)        (38,551)        (45,124)
     Capitalized                      6,813           9,039           3,957
     Income                           9,350           8,728           2,719
                                 ----------      ----------      ----------
                                     (3,373)        (20,784)        (38,448)
                                 ----------      ----------      ----------
   Earnings before income taxes 
     and extraordinary item         319,535         459,312         308,889

   Income taxes (Note E)            120,800         179,200         126,600
                                 ----------      ----------      ----------
   Earnings before extraordinary
     item                           198,735         280,112         182,289

   Extraordinary loss on early
     extinguishment of debt,
     less applicable taxes
     (Note F)                          -            (22,189)           -   
                                 ----------      ----------      ----------

   Net earnings                 $   198,735     $   257,923     $   182,289
                                 ==========      ==========      ==========

   Earnings per share:
     Earnings before extraordinary
       item                           $2.06           $2.90           $1.90
     Extraordinary item                 -              (.23)            -  
                                       ----            ----            ----
     Net earnings                     $2.06           $2.67           $1.90
                                       ====            ====            ====




See notes to consolidated financial statements.


                                   -2-   

                           IBP, inc. AND SUBSIDIARIES             
              CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY        
                (In thousands except per share data)

                    Common Stock  Additional             Currency
                            Par    Paid-In    Retained  Translation Treasury
                    Shares Value   Capital    Earnings  Adjustments  Stock   
Balances,           ------ ------ ---------   --------  ----------- --------   
 December 25, 1993  47,500 $2,375  $441,959   $168,695    $   -     $  (233)
 Net earnings                                  182,289            
 Dividends declared,                                                          
   $.10 per share                               (9,492)            
 Treasury shares                                                             
   purchased                                                         (8,928)
 Treasury shares              
   delivered under           
   employee stock
   plans                             (2,392)                          7,295
 Foreign currency
   translation
   adjustments                                             (1,074)         
Balances,           ------  -----   -------    -------      -----     ----- 
 December 31, 1994  47,500  2,375   439,567    341,492     (1,074)   (1,866)
 Net earnings                                  257,923              
 Dividends declared, 
   $.10 per share                               (9,479)            
 Additional shares
   issued in two-
   for-one stock
   split effected
   in the form of 
   a stock dividend
   (Note G)         47,500  2,375    (2,375) 
 Treasury shares                                                      
   purchased                                                        (13,441)
 Treasury shares             
   delivered under
   employee stock
   plans                             (4,466)                         10,718
 Foreign currency
   translation
   adjustments                                              1,190             
Balances,           ------  -----   -------    -------      -----     -----
 December 30, 1995  95,000  4,750   432,726    589,936        116    (4,589)
 Net earnings                                  198,735 
 Dividends declared,
  $.10 per share                                (9,472) 
 Treasury shares
  purchased                                                         (15,405)  
 Treasury shares
  delivered under 
  employee stock
  plans                              (5,270)                         12,276
 Foreign currency
  translation
  adjustments                                                (148)         
Balances,           ------  -----   -------    -------     ------    ------
 December 28, 1996  95,000 $4,750  $427,456   $779,199    $   (32)  $(7,718)
                    ======  =====   =======    =======     ======    ====== 
See notes to consolidated financial statements.

                                    -3-

                           IBP, inc. AND SUBSIDIARIES         
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                                                   53 Weeks
                                              52 Weeks Ended         Ended
                                        Dec. 28,      Dec. 30,     Dec. 31, 
                                           1996          1995        1994    
                                       -----------   -----------  ----------
                                                   Inflows (outflows)
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net earnings                              $198,735    $ 257,923  $ 182,289
 Adjustments to reconcile net earnings       
  to cash flows from operations:
   Depreciation and amortization             82,690       92,539     63,443
   Deferred income tax provision (benefit)    7,500      (11,600)   (16,800)
   Extraordinary loss on
    extinguishment of debt                     -          22,189       -
   Net changes in:
    Accounts payable and accrued 
     liabilities                            (57,976)      60,943    143,997 
    Accounts receivable                      28,950      (14,336)   (32,811)
    Inventories                               3,912      (58,705)    (6,179) 
  Other adjustments, net                      4,167        2,127      4,962
                                          ---------     --------   -------- 
                                             69,243       93,157    156,612
 Net cash flows provided by               ---------     --------   --------   
  operating activities                      267,978      351,080    338,901
                                          ---------     --------   --------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchases of marketable securities      (1,043,180)    (576,167)  (156,307)
 Proceeds from disposals of marketable
  securities                                922,051      588,591     80,000
 Capital expenditures                      (170,664)    (160,626)   (83,868)
 Payment for stock of new subsidiaries,
  net of cash acquired                         -            -       (51,973)
 Other investing activities, net              1,944        2,188        860
 Net cash flows used in investing         ---------     --------   -------- 
  activities                               (289,849)    (146,014)  (211,288)
                                          ---------     --------   --------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Net change in borrowings under                         
  revolving credit agreements              (200,000)     250,000    (25,661)
 Proceeds from issuance of long-term 
  debt                                      197,878         -          -
 Net change in checks in process of 
  clearance                                  22,520      (18,135)    82,333 
 Dividends paid                              (9,473)      (9,484)    (9,495)
 Principal payments on long-term 
  obligations                                  (615)    (350,761)  (111,766)
 Premiums paid on early retirement of debt     -         (35,420)      -
 Other financing activities, net            (10,626)      (9,767)    (3,991)
Net cash flows used in financing          ---------     --------   --------
   activities                                  (316)    (173,567)   (68,580)
Effect of exchange rate on cash and       ---------     --------   --------
   cash equivalents                              74          549       -   
Net change in cash and cash               ---------     --------   --------
  equivalents                               (22,113)      32,048     59,033    
Cash and cash equivalents at beginning 
  of year                                   116,277       84,229     25,196
Cash and cash equivalents at end          ---------     --------   --------
  of year                                $   94,164    $ 116,277  $  84,229
                                          =========     ========   ========

See notes to consolidated financial statements.
                                    -4-

                               IBP, inc. AND SUBSIDIARIES       
                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
        YEARS ENDED DECEMBER 28, 1996 (52 weeks), DECEMBER 30, 1995
                        (52 weeks) AND DECEMBER 31, 1994 (53 weeks)            
       
A.    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

      ORGANIZATION AND BASIS OF PRESENTATION - In 1981, IBP, inc. (IBP)
became a wholly-owned subsidiary of Occidental Petroleum Corporation
(Occidental) through a reorganization and plan of merger.  The
accompanying financial statements include the assets, liabilities and
stockholders' equity of IBP, after giving effect to the allocation of
Occidental's acquisition cost to the net assets acquired, as determined
under the purchase method of accounting.  Occidental no longer controls
IBP nor has any person acquired control of IBP.  

      NATURE OF OPERATIONS AND INDUSTRY SEGMENT INFORMATION -   IBP's
operations relate to the meat packing industry and primarily involve
cattle and hog slaughter, beef and pork fabrication and related allied
product processing activities.  The company also produces precooked
meats for the retail and food service industries.  IBP's customers
include food retailers, distributors, wholesalers, restaurant and hotel
chains, other food processors and leather makers, as well as
manufacturers of pharmaceuticals and animal feeds.  Management
considers its operations to comprise one industry segment.

      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.

      EXPORT SALES - In 1996, 1995 and 1994, net export sales,
principally to customers in Asia and also to destinations in Canada,
Mexico and Europe, amounted to $1.7 billion, $1.8 billion and $1.5
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 FINANCIAL 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.
                               -5-
                                                      
 
      MARKETABLE SECURITIES - These 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

      Management adjusted its estimate of salvage value for most fixed
assets during 1995 to better reflect actual experience.  This
adjustment increased cost of products sold by approximately $18
million.

      Leasehold improvements, included in the equipment class, are
amortized over the life of the lease or the life of the asset,
whichever is shorter.

      CAPITAL LEASES - Lease arrangements entered into by IBP that
constitute capital lease obligations are capitalized at the present
value of future lease payments.  The values assigned to leased assets
are included in property, plant and equipment and accounted for
accordingly.  Amortization of leased assets is included in depreciation
and amortization expense.  The capital lease obligations are amortized
over the lease terms as payments are made.

      ENVIRONMENTAL LIABILITIES -  Environmental expenditures are
accrued, except to the extent costs can be capitalized, based on
estimates of known environmental remediation exposures.  Such accruals
are made even if some uncertainties exist over the ultimate cost of the
remediation processes.  

      GOODWILL - Goodwill is amortized on a straight-line basis over 
periods ranging from 15 years to 40 years.  Management reviews goodwill
as well as other long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable.

      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.



                            -6-
                                                      

      EARNINGS PER SHARE - Earnings per share for the years 1996, 1995
and 1994 were calculated using average common and common equivalent
shares of 96,632,000, 96,671,000 and 96,163,000, respectively.

     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 28,      December 30,
                                     1996              1995
                                  -----------       -----------          
                                          (In thousands)
        Held for sale:
           Beef products           $169,068           $185,500
           Pork products             39,913             34,788
           Other                      8,460              8,478
                                    -------            -------
                                    217,441            228,766
        Livestock                    28,345             25,355
        Supplies                     53,914             49,590
                                    -------            -------
                                   $299,700           $303,711
                                    =======            =======
C.    CREDIT ARRANGEMENTS:

      At December 28, 1996, IBP had in place a $500,000,000 multi-year
credit agreement (the Multi-Year Facility).   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, which may be extended for one-year
increments annually during the revolving period with consent of the
banks involved.  Facility fees can vary from .085 to .200 of 1% on the
total amount of the facility.

      Total outstanding borrowings of $50,000,000 at December 28, 1996
under the Multi-Year Facility have been classified as long-term in the
consolidated balance sheet.  The company intends to refinance this
amount on a long-term basis at a later date.  The interest rate at
December 28, 1996 on these borrowings was 5.5%.

      During fiscal 1996, the maximum amount of borrowings under all of
IBP's credit arrangements, including any amounts considered long-term,
was $250,000,000.  Average borrowings under IBP's credit arrangements
and the weighted average interest rate during fiscal 1996 were 
$68,288,000 and 5.7%.  The comparable 1995 figures were $13,327,000 in
average borrowings and an average interest rate of 6.1%.











                           -7-

                         
                            
                                                      
D.    ACCOUNTS PAYABLE AND ACCRUED EXPENSES:

      Accounts payable and accrued expenses are comprised of the
following:
                                   December 28,    December 30,
                                       1996            1995    
                                   -----------     -----------
                                          (In thousands)
   Accounts payable, principally    
     trade creditors                 $181,161       $210,157
                                      -------        -------
   Checks in process of clearance     118,624         96,114
                                      -------        -------
   Accrued expenses:                  
     Employee compensation             76,034         95,102
     Employee benefits                 55,509         56,122
     Other                             78,192         91,439
                                      -------        -------
                                      209,735        242,663
                                      -------        -------
                                     $509,520       $548,934
                                      =======        =======
E.    INCOME TAXES:

      Income tax expense consists of the following:
      

                               1996           1995           1994
                              -------        -------        -------    
                                         (In thousands)
        Current:
          Federal            $100,775       $173,600       $135,550
          State                 8,275         12,100          7,275
          Foreign               4,250          5,100            575
                              -------        -------        -------
                              113,300        190,800        143,400
                              -------        -------        -------
        Deferred:
          Federal               6,575        (10,375)       (15,350)
          State                   550           (850)        (1,300)
          Foreign                 375           (375)          (150)
                              -------        -------        -------
                                7,500        (11,600)       (16,800)
                              -------        -------        -------
                             $120,800       $179,200       $126,600
                              =======        =======        =======

      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:

                                1996           1995          1994
                                ----           ----          ----
                                            
  Federal income tax rate       35.0%          35.0%         35.0%
  State income taxes, net                                        
   of federal benefit            1.7            1.8           1.5
  Goodwill amortization          0.8            0.7           0.9 
  Foreign Sales Corporation
   benefits                     (0.5)          (0.4)         (0.4)
  Targeted jobs credits           -              -           (0.3)
  Income tax contingencies       0.8            2.1           4.6 
  Other, net                      -            (0.2)         (0.3)
                                ----           ----          ---- 
                                37.8%          39.0%         41.0% 
                                ====           ====          ====


                               -8-

                                                        

      The Internal Revenue Service (IRS) has proposed certain income tax
adjustments which are being contested by the company involving the
years 1989, 1990, and 1991.  The IRS is currently examining the years
1992 and 1993.  In management's opinion, adequate provisions for income
taxes have been made for all years.
    
  Deferred income tax liabilities and assets were comprised of:

                                       December 28, December 30,
                                           1996         1995
                                       ----------   -----------         
                                             (In thousands)
  Deferred tax liabilities:
    Fixed assets basis differences       $ 81,428      $ 80,928
    Farm accounting basis differences       8,115         8,062
                                          -------       -------
                                           89,543        88,990
                                          -------       -------
  Deferred tax assets:  
    Nondeductible accrued liabilities     (50,796)      (56,927)
    State tax credit carryforwards        (13,897)      (11,949)
    Bad debt and claims reserves           (3,890)       (3,846)
    Safe harbor leases                       (708)       (1,640)
    Federal and state operating
     loss carryforwards                        (7)           (8)
    Other                                    (372)       (1,064)
                                          -------       -------
    Gross deferred tax assets             (69,670)      (75,434)
    Valuation allowance                    13,904        11,957
                                          -------       ------- 
    Net deferred tax assets               (55,766)      (63,477)
                                          -------       -------
                                         $ 33,777      $ 25,513
                                          =======       =======

      The net $1.9 million increase in the valuation allowance for
deferred tax assets is the result of a net increase in state tax credit
carryforwards.  No benefit has been recognized for these state tax
credit carryforwards, which expire primarily in the years 2004 through
2008.

F.    LONG-TERM OBLIGATIONS:

      Long-term obligations are summarized as follows:

                                         December 28,    December 30,
                                             1996            1995 
                                         -----------     -----------
                                               (In thousands)
         6 1/8% Senior Notes due 2006     $100,000        $   -   
         7 1/8% Senior Subordinated
           Debentures due 2026             100,000            -   
         Multi-Year Facility                50,000         250,000
         Present value of minimum 
           capital lease obligations         9,610           9,900
         Other                               1,044           1,467
                                           -------         -------
                                           260,654         261,367
         Less amounts due within one 
           year                                646             615
                                           -------         -------
                                          $260,008        $260,752
                                           =======         =======





                                -9-

                                                   
      In the fourth quarter of 1995, IBP began a process of refinancing
its long-term debt.  On December 15, 1995, IBP prepaid its $275 million
principal amount of 9.82% Senior Notes due 2000 and its $75 million
principal amount of 10.39% Senior Subordinated Debentures due 2002. 
The prepayments were funded with available cash and $250 million
borrowed under available credit facilities.  This amount was classified
as long-term at December 30, 1995, due to IBP's ability and intent to
refinance this amount on a long-term basis.  Net prepayment premiums
and the accelerated amortization of unamortized deferred financing
costs totaled $36.4 million, before applicable income tax benefit of
$14.2 million, which has been accounted for as a net extraordinary loss
of $22.2 million in 1995.
      
      In January 1996, IBP completed its public offerings of $100
million principal amount of 6 1/8% Senior Notes due 2006 and $100
million principal amount of 7 1/8% Senior Subordinated Debentures due
2026.  These offerings were part of a total shelf registration of $500 
million.  Proceeds from the offerings were used to reduce borrowings under
the Multi-Year Facility to $50 million.  This amount was classified as
long-term at December 28, 1996, due to IBP's ability and intent to
refinance this amount on a long-term basis.

      IBP's loan 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.  

      Aggregate maturities of long-term obligations for each of the five
fiscal years subsequent to 1996 are $646,000; $622,000; $834,000;
$50,355,000 and $375,000.

      Substantially all of the leased assets under capital leases can
be purchased by IBP for nominal consideration at the end of the lease
terms.  Leased assets, which are included with owned property in the
consolidated balance sheets, totaled $5.4 million at December 28, 1996,
and $6.5 million at December 30, 1995, net of accumulated depreciation.

      The company leases various facilities and equipment under
noncancelable operating lease arrangements.  Future minimum payments
under noncancelable operating leases with lease terms in excess of one
year at December 28, 1996 totaled $49,500,000.  These operating leases
expire at various dates through the year 2015.

G.    CAPITAL STOCK AND STOCK PLANS:

      Preferred Stock:
      The Board of Directors is authorized to issue up to 25,000,000
shares of preferred stock at such time or times, in such series, with
such designations, preferences or other special rights as it may
determine.

      Stock Split:
      On December 18, 1995, the company's Board of Directors authorized
a two-for-one stock split effected in the form of a 100% stock dividend
and was distributed on January 19, 1996 to shareholders of record on
December 28, 1995.  




                                -10-

                                                      
      Officer Long-Term Stock Plans:
      IBP has officer long-term stock plans which provide for awards to
key employees of IBP which, subject to certain restrictions, will vest
generally after five years resulting in the delivery of shares of
common stock.  Initial awards effective in 1992 were granted in 1993,
totaling approximately 1,110,000 shares at $8.06 per share.  Additional
awards totaling approximately 320,000 shares have been granted through
1996 at an average cost of $20.50 per share.  The plans allow for a
maximum of 2,400,000 shares of common stock to be delivered; at
December 28, 1996, there were approximately 1,010,000 shares available
for future awards.  The company recognized compensation expense for
these plans totaling $3.0 million, $2.2 million and $2.4 million,
respectively, in 1996, 1995 and 1994.

      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 28, 1996, the plans provide for the
delivery of up to 8,476,000 shares of common stock upon exercise of
options granted at no less than the fair market value of the shares on
the date of grant.  The 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 28, 1996 and December 30, 1995,
there were 3,926,000 and 867,000 options, respectively, reserved for
future grants.

      The company has adopted the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation."  Accordingly, no compensation cost has been 
recognized for the stock option plans.  Had compensation cost for IBP's
stock option plans been determined based on the fair value at the grant
date for awards in 1995 and 1996 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:

                                                 1996        1995 
                                               -------     -------
            Net earnings - as reported        $198,735    $257,923
            Net earnings - pro forma           196,518     256,407
            Earnings per share - as reported      2.06        2.67
            Earnings per share - pro forma        2.03        2.65

      
      The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions for options granted in 1995 and 1996: 

                             1996                    1995           
                      ----------------------  ----------------------
                      Officers  Non-officers  Officers  Non-officers
                      --------- ------------  --------- ------------
Expected option life  6.4 years   5.5 years   6.4 years   5.5 years
Expected annual 
 volatility              29.7%       29.7%       29.7%        29.7%
Risk-free interest 
 rate                    6.54%       6.46%       5.56%        5.51%
Dividend yield            .44%        .44%        .44%         .44%
 
                              -11-
                             
                           

                                                

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 25, 1993   3,557,672      $10.56                  
   Granted              1,049,900       16.78  
   Exercised             (468,936)       7.49  
   Forfeited             (284,560)      10.43                   
   Balance at           ---------       -----
    December 31, 1994   3,854,076       11.47         1,489,924
   Granted              1,526,097       24.55  
   Exercised             (466,626)       8.49  
   Forfeited             (329,952)      13.88                        
   Balance at           ---------       ----- 
    December 30, 1995   4,583,595       14.93         1,256,358
   Granted                675,388       24.25  
   Exercised             (464,362)      10.04  
   Forfeited             (244,693)      19.88                  
   Balance at           ---------       -----
    December 28, 1996   4,549,928      $16.09         1,721,044
                        =========       =====

  The following table summarizes information about stock options
outstanding at December 28, 1996:

                        Number    Weighted Average
      Range of       Outstanding      Remaining      Weighted Average
Exercisable prices   At 12/28/96  Contractual Life    Exercise Price 
------------------   -----------  ----------------   ----------------
   $ 6 to 15         2,247,085         5.0 Years        $ 9.68
    16 to 25         2,191,724         8.7 Years         21.99
    26 to 35           111,119         9.1 Years         28.10      
---------------------------------------------------------------------
   $ 6 to 35         4,549,928         6.9 Years        $16.09    
 
                        Number 
      Range of       Exercisable   Weighted Average
Exercisable prices   At 12/28/96    Exercise Price 
------------------   -----------   ---------------- 
   $ 6 to 15         1,504,751        $ 8.54
    16 to 25           215,933         16.48  
    26 to 35               360         31.38       
---------------------------------------------------                    
   $ 6 to 35         1,721,044        $ 9.54

      Share Delivery Restrictions:                 
      Shares of common stock to be delivered for approximately
1,600,000 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.
 
                           -12-





                                                  
H.    SUPPLEMENTAL CASH FLOW INFORMATION:

      Supplemental information on cash payments is presented as
follows:
                                   1996         1995          1994
                                  -------      -------       ------   
                                           (In thousands)
    Interest, net of amounts     
      capitalized                $  2,045     $ 34,040      $39,527
    Income taxes                  108,625      192,028       68,491

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 enters 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.  

      The notional amounts of these swap agreements were $100 million
at year-end 1996 and zero at year-end 1995.  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 enters into foreign currency forward exchange
contracts to hedge its sales denominated in foreign currencies.  At
December 28, 1996, the company's Canadian subsidiary had outstanding
forward contracts to sell US$5.0 million through January 1997.  At
December 30, 1995, outstanding contracts to sell US dollars totaled
$5.5 million.

      The company's Canadian subsidiary also enters into currency
futures contracts to hedge its exposure on live cattle purchase
commitments in foreign currencies.  At December 28, 1996, the company
had outstanding contracts to buy CDN$22.6 million through June 1997. 
Similar outstanding contracts at year-end 1995 totaled CDN$14.9
million.

      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.













                                -13-

                                                     
      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 28, 1996:     

      For cash and cash equivalents, marketable securities, accounts
receivable 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.

      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 1996, the carrying value exceeded the fair
value by $9.3 million.  At year-end 1995, the carrying value
approximated the fair value.

      For derivatives, the fair value was estimated using termination
cash values.  At year-end 1996, interest rate swap agreement values
would represent an obligation of $5.8 million.  The market impact of
this obligation is offset by the opposite market impact on the related
long-term debt. The fair value of foreign currency derivatives at
December 28, 1996 would represent an obligation of $0.2 million and at
December 30, 1995 would represent an asset of $0.2 million.

J.    COMMITMENTS AND CONTINGENCIES:

      IBP is involved in numerous disputes incident to the ordinary
course of its business.  In the opinion of management, any liability
for which provision has not been made relative to the various
lawsuits, claims and administrative proceedings pending against IBP,
including that described below, will not have a material adverse
effect on its consolidated results of operations, financial position
or liquidity.

      A $15,004,000 jury verdict was returned against IBP in November
1994 in an Iowa State District Court.  The plaintiff, a former IBP
employee, sued the company and another former employee in February
1993 for slander and breach of fiduciary duty regarding his treatment
as a workers' compensation claimant.  The jury determined that the
plaintiff sustained $4,000 in actual damages, and awarded him
$15,000,000 punitive damages, all of which was provided for by the
company in 1994.  Although the District Court reduced punitive damages
to $100,000, on appeal the Iowa Supreme Court ordered IBP to pay
$2,000,000 in punitive damages.  The company is seeking a rehearing by
the Iowa Supreme Court and possible review by the United States
Supreme Court.  The company reduced its $15,000,000 reserve for this
case to $100,000 in the fourth quarter 1996.







                                      -14-

                                                       

K.    QUARTERLY FINANCIAL DATA (UNAUDITED):

      Quarterly results are summarized as follows:  (In thousands except per
share data)
       
                    First       Second      Third       Fourth    
1996                Quarter     Quarter     Quarter     Quarter       Annual
----               ---------   ---------   ---------  ---------   ----------
Net sales         $3,084,722  $3,260,268  $3,175,940 $3,017,823  $12,538,753
Gross profit         117,900     175,587      94,472     55,244      443,203
Net earnings          53,027      86,988      40,467     18,253      198,735
Earnings per share       .55         .90         .42        .19         2.06
Dividends per share     .025        .025        .025       .025          .10
Market price:
  High                27 1/8      28 7/8      27 5/8     26 1/2
  Low                 23 1/4      23 3/8      22 3/4     23 1/8   
                        
1995
----
Net sales         $3,006,663  $3,209,140  $3,290,644 $3,161,115  $12,667,562
Gross profit         117,848     182,209     178,165    125,846      604,068
Earnings before                                                               
  extraordinary                                                               
  item                51,815      85,844      85,412     57,041      280,112
Net earnings          51,815      85,844      85,412     34,852      257,923
Earnings per share:
  Earnings before
  extraordinary item     .54         .89         .88        .59         2.90
  Net earnings           .54         .89         .88        .36         2.67
Dividends per share     .025        .025        .025       .025          .10
Market price:
  High                16 5/8      21 3/4    26 11/16    33 5/16
  Low                14 9/16    15 15/16      21 5/8    22 1/16


























                                      -15-



                       REPORT OF INDEPENDENT ACCOUNTANTS
                         


To the Board of Directors and Stockholders of IBP, inc.



      We have audited the accompanying consolidated balance sheets of
IBP, inc. and subsidiaries as of December 28, 1996 and December 30,
1995, and the related consolidated statements of earnings, changes
in stockholders' equity, and cash flows for the years then ended. 
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.  The financial statements
of IBP, inc. and subsidiaries for the year ended December 31, 1994
were audited by other auditors, whose report, dated February 3,
1995 expressed an unqualified opinion on those statements.

      We conducted our audits in accordance with generally accepted
auditing standards.  Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement.  An audit
also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements.  An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation.  We believe that our audits
provide a reasonable basis for our opinion.

      In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of IBP, inc. and subsidiaries as of December 28,
1996 and December 30, 1995, and the consolidated results of their
operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.


COOPERS & LYBRAND L.L.P.

Omaha, Nebraska
January 24, 1997


MANAGEMENT'S REPORT ON FINANCIAL INFORMATION

     The management of IBP, inc. is responsible for the integrity of
the financial data reported by IBP and its subsidiaries.  Fulfilling this
responsibility requires the preparation and presentation of consolidated
financial statements in accordance with generally accepted accounting
principles.  Management uses internal accounting controls, corporate-wide
policies and procedures, estimates and judgments in order that such state- 
ments reflect fairly the consolidated financial position, results of
operations and cash flows of IBP.





                                                 



                  MANAGEMENT'S DISCUSSION AND ANALYSIS


RESULTS OF OPERATIONS

      IBP achieved solid results with an earnings performance in
1996 that was the second highest in the company's history. 
However, a combination of tight livestock supplies and reduced
export sales in the second half of 1996 put significant pressure on
operating margins, creating a difficult comparison to the record
financial results attained in 1995.

      Earnings from operations as a percentage of net sales measured
2.6% in 1996 versus 3.8% in 1995.  The Fresh Meats division
experienced reduced capacity utilization levels, especially in its
pork operations, thereby increasing per unit
costs and reducing margins.  Cow boning operating earnings improved
in 1996 over 1995, while the Consumer Products division experienced
less favorable results in 1996 compared to 1995.  Recent industry
reports on cattle inventories and placements into feedlots show
positive numbers of available market-ready cattle
until late in 1997, when supplies are expected to tighten
moderately.  Market analysts are predicting the opposite situation
for hog supplies, expecting that supplies will remain tight for
most of 1997 but increase later this year and into
1998.  Management expects pork margins to remain under pressure
until hog numbers improve and/or processing capacity is reduced.

      While IBP's pork operations have been adversely affected by
the tight hog supplies and a substantial expansion of pork industry
processing capacity, management believes that favorable global
market dynamics, which include a strong consumer preference for
pork protein, growing income levels among emerging nations and the
low cost producer status of the U.S. industry from producer to
processor, will bring long-term success for the company's pork
operations.

      The matters discussed herein contain forward-looking
statements that involve risks and uncertainties including risk of
changing market conditions with regard to livestock supplies and
demand for the company's products, domestic and international
regulatory risks, competitive and other risks over which IBP has
little or no control.  Consequently, future results may differ from
management's expectations.  Moreover, past financial performance
should not be considered a reliable indicator of future
performance.









                               -1-

                                                  
COMPARISON OF 1996 to 1995

      SALES       

      Net sales in 1996 were 1.0% below the record level achieved in
1995.  A decrease in pounds of beef and pork products sold in IBP's
core fresh meats operations in 1996 versus 1995 as well as a
decrease in the average price of beef products sold were the
primary factors in the lower 1996 net sales.  These factors were
partially offset by an increase in the average price of pork
products sold and a full year of cow boning operations in 1996
(nine months in 1995 for the three plants purchased in 1995 and no
prior year sales for the Palestine plant purchased in the second
quarter 1996).

      IBP's net export sales in 1996 were 8% lower than in 1995.  An
outbreak of E. Coli, a bacterial illness, in Japan, the company's
most significant export market, caused a food safety scare among
Japanese consumers.  This problem significantly reduced IBP exports
to the Pacific Rim during the second half of 1996, even though the
source of the illnesses appeared to be non-meat related. 
Management expects that shipments to Japan will return to more
normal levels as these concerns subside.  Exports accounted for
13.4% of consolidated net sales in 1996 compared to 14.4% in 1995.

      COST OF PRODUCTS SOLD

      A 1% increase in 1996 cost of products sold from 1995 was due
primarily to a full year of operations in 1996 for three cow boning
plants purchased in 1995 versus nine months in the prior year. 
Meanwhile, 1996 livestock costs in the company's core beef and pork
operations decreased from 1995.  A lower average price paid for
live cattle and fewer pounds of beef products sold were partially
offset by the effect of a higher average price paid for live hogs. 
Livestock costs comprised 88% of total cost of products sold in
1996 and 1995.  

      The cost of products sold in 1996 was reduced $13 million
(after bonus impact) by reduction of a workers' compensation
lawsuit reserve due to favorable developments in the fourth quarter
1996 (more fully described in Note J to the consolidated financial
statements).  In addition, 1995 cost of products sold included $18
million (after bonus impact) for a second quarter  adjustment to
salvage value for most fixed assets to better reflect actual
experience.   
      
      SELLING, GENERAL AND ADMINISTRATIVE EXPENSE

      Reduced incentive compensation based upon lower 1996 operating
earnings was the most significant factor in the 3% decrease in 1996
expense from 1995.  Administrative costs were higher in 1996 as a
result of higher personnel-related costs to support the company's
expanding operations.  Selling expense also increased in 1996 over
1995 due principally to higher international selling costs as the
company added foreign service centers in Korea and Taiwan.

                               -2-

                                              
      INTEREST EXPENSE

      Net interest expense in 1996 fell 84% from the year earlier. 
These reductions resulted in part from a lower effective interest
rate due to the refinancing of substantially all of IBP's long-term
obligations at lower rates early in 1996.  Additionally, 1996
borrowings averaged almost $100 million less than in 1995 due to
continued strong operating cash flows.

      INCOME TAXES

      The lower 1996 income tax provision compared to 1995 resulted
primarily from the decrease in pre-tax earnings.


COMPARISON OF 1995 TO 1994                       

      SALES
      The 4.9% increase in net sales from 1994 was attributable
primarily to the additions of its Canadian subsidiary, Lakeside
Farm Industries, Ltd. (Lakeside), purchased in October 1994, and
three beef cow boning plants acquired in 1995.  Net sales from
fresh beef and pork operations, excluding Lakeside and the beef
boning plants, were down slightly from the previous year due mainly
to a reduction in pounds of pork products sold.                   

      Net export sales in 1995 totaled $1.8 billion or 14.4% of
total net sales as compared to $1.5 billion and a 12.8% share of
total net sales in 1994.  An overall increase in pounds of products
sold, especially of higher-value red meat products to Asian
markets, was the chief factor in the export sales increase. 
Exports to the Far East, IBP's most significant export market, have
risen in part due to increased demand, lowered import restrictions,
favorable currency exchange rates and the development of additional
markets.  

      COST OF PRODUCTS SOLD

      The Lakeside and beef boning plants acquisitions were the
chief reason for the 3.9% increase in cost of products sold in 1995
compared to 1994.  The company's fresh meats division, exclusive of
new operations, experienced a higher average cost of livestock in
1995 which was offset somewhat by a decrease in pounds of products
sold from 1994.  Management adjusted the estimated salvage value
for most fixed assets in the second quarter 1995 to better reflect
actual experience, which increased plant costs by approximately $18
million.    

      SELLING, GENERAL AND ADMINISTRATIVE EXPENSE

      The principal components of the 9.9% increase in 1995 selling,
general and administrative expense versus 1994 were higher accruals
for earnings-based incentive compensation, incremental selling and
administrative expense associated with new operations and increased
export-related selling expense.
      


                               -3-     

                                                   
      INTEREST EXPENSE

      IBP's 1995 net interest expense decreased 45.9% from 1994 due
to several factors.  Average outstanding borrowings were 21.0% less
in 1995 than in 1994 due to strong operating cash flows and debt
reductions in the second half of 1994.  In addition, an increase in
capital spending caused 1995 capitalized interest to increase $5.1
million (128.4%) over 1994.  Finally, a surplus of cash over and
above IBP's working capital needs, especially in the second half of
1995, brought about a $6.0 million (221.0%) increase in interest
income.    

      INCOME TAXES

      The higher 1995 income tax provision over 1994 was due
primarily to the increase in pre-tax earnings.  

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 one week to turn its
product inventories and two weeks 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
facility (more fully described in Note C to the consolidated
financial statements) provides IBP with same-day access to an
aggregate of $500 million in potential borrowings.  The unused
portion of the credit line was $450 million at December 28, 1996
and was unchanged at the end of January 1997.  

      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 and asset-based liquidity:

                                       December 28,  December 30,
                                           1996          1995
                                       -----------   -----------    
   Working capital (in thousands)        $506,454      $427,241
   Current ratio                            1.8:1         1.7:1
   Quick ratio                              1.3:1         1.1:1
   Number of days' sales in accounts
    receivable                               14.0          14.3
   Inventory turnover                        40.3          42.0


      The company's financial position has continued to strengthen
as a result of significant operating cash flows and long-term debt
reductions.




                               -4-

                                              
      Capital expenditures in 1996 totaled $171 million compared to
$161 million in 1995.  Current year additions included construction
of a processing facility at the company's Brooks, Alberta, Canada,
beef plant, which began production in the first quarter 1997,
purchase of a cow processing facility in Palestine, Texas,
conversion of a facility in Columbia, South Carolina, for cooked
meats production (also a first quarter 1997 start up) and
expansions and/or improvements of box handling facilities at some
of the company's major beef complexes.

      Management's estimate of 1997 capital spending is in the range
of $200 million, which the company expects to fund from operating
cash flows and available debt facilities.

YEAR 2000

      Management has made an assessment of the capability of its
computer-based systems to properly handle dates of January 1, 2000
and beyond.  Management does not expect that costs incurred to
address this issue will be material.

STOCKHOLDERS AND MARKET DATA

      IBP's common shares were held by approximately 6,700
stockholders of record at year-end 1996.  The common stock is
listed on the New York and Pacific Stock Exchanges.
































                                -5-