FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended ___________July 29, 1994___________
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
Commission file number ______________0-1667_______________
Bob Evans Farms, Inc.
(Exact name of registrant as specified in its charter)
Delaware 31-4421866
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
3776 South High Street Columbus, Ohio 43207
(Address of principal executive offices)
(Zip Code)
(614) 491-2225
(Registrant's telephone number, including area code)
(Former name, former address and formal fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
As of the close of the period covered by this report, the
registrant had issued 42,638,118 common shares.
<TABLE>
BOB EVANS FARMS, INC.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
(Dollars in Thousands)
July 29, 1994 April 29, 1994
Unaudited Audited
<S> <C> <C>
Current Assets
Cash $ 5,107 $ 6,699
Investments 2,537 1,399
Accounts receivable 14,423 15,445
Inventory 13,645 15,799
Deferred income taxes 4,585 4,585
Prepaid expenses 3,129 3,514
Total Current Assets 43,426 47,441
Property, Plant, and Equipment, at cost 523,856 509,831
Less accumulated depreciation 163,873 160,061
Net Property, Plant and 359,983 349,770
Equipment
Other Assets
Deposits and other 2,114 2,002
Deferred income taxes 1,049 1,049
Cost in excess of net assets 11,420 11,555
acquired
Other intangible assets 1,980 2,058
Total Other Assets 16,563 16,664
$419,972 $413,875
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Line of Credit $ 2,500 $ 9,500
Accounts payable 8,077 12,200
Dividends payable 3,057 2,839
Federal and state income taxes 10,962 6,160
Accrued wages and related 8,249 10,830
liabilities
Other accrued expenses 21,625 18,023
Total Current Liabilities 54,470 59,552
Long-Term Liabilities
Deferred income taxes 5,495 5,495
Stockholders' Equity
Common stock, $.01 par value
Authorized: 100,000,000
shares;
issued 42,638,118 shares 426 426
Capital in excess of par value 144,540 144,782
Retained earnings 221,419 211,294
366,385 356,502
Less treasury stock: 477,965
shares
at July 29, 1994 and 575,890
shares
at April 29, 1994, at cost 6,378 7,674
Total Stockholders' Equity 360,007 348,828
$419,972 $413,875
The accompanying notes are an integral part of the financial
statements.
</TABLE>
<TABLE>
BOB EVANS FARMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
<CAPTION>
(Dollars in Thousands Except Net Income
Per Share and Cash Dividend Amounts)
Thirteen Weeks Ended
July 29, 1994 July 30, 1993
<S> <C> <C>
Net sales $ 197,939 $ 178,431
Cost of sales 62,879 57,185
Operating expenses 82,891 73,722
Selling, general and administrative 24,859 23,226
expenses
Depreciation expense 5,954 5,372
Operating profit 21,356 18,926
Net interest 45 (106)
Income Before Income Taxes 21,401 18,820
Provisions for income taxes
Federal 6,692 5,684
State 1,526 1,321
8,218 7,005
Net Income $13,183 $11,815
Weighted average number of common 42,122,925 41,936,442
shares outstanding
Net income per common share based upon
the weighted average number of
common shares $ .31 $.28
Cash dividend per common share $.073 $.068
The accompanying notes are an integral part of the financial
statements.
</TABLE>
<TABLE>
BOB EVANS FARMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<CAPTION>
(Dollars in Thousands)
Thirteen Weeks Ended
July 29, 1994 July 30, 1993
<S> <C> <C>
Operating activities:
Net income $13,183 $11,815
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 6,167 5,586
Loss (gain) on sale of property and (3) 128
equipment
Compensation expense attributable to 209
stock plans
Cash provided by (used for) current
assets and current liabilities:
Accounts receivable 1,022 (253)
Inventories 2,154 1,411
Prepaid expenses 385 (2,244)
Accounts payable (4,123) (898)
Federal and state income taxes 4,802 4,083
Accrued wages and related (2,468) (2,967)
liabilities
Other accrued expenses 3,602 4,802
Net cash provided by 24,930 21,463
operating activities
Investing activities:
Purchase of property, plant and (16,204) (12,187)
equipment
Purchase of investments (1,138) (3,965)
Proceeds from sale of property, plant 40 57
and equipment
Other (112) 360
Net cash used in investing (17,414) (15,735)
activities
Financing activities:
Cash dividends paid (2,841) (2,620)
Payments on line of credit (7,000)
Distribution of treasury stock due to
the exercise of stock options and
employee bonuses 733 819
Net cash used in financing (9,108) (1,801)
activities
Increase (decrease) in cash (1,592) 3,927
Cash at the beginning of the period 6,699 8,241
Cash at the end of the period $ 5,107 $12,168
The accompanying notes are an integral part of the financial
statements.
</TABLE>
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
1. Unaudited Financial Statements
The accompanying unaudited financial statements are
presented in accordance with the requirements of Form 10-Q
and, consequently, do not include all of the disclosures
normally required by generally accepted accounting
principles, or those normally made in the Company's Form
10-K filing. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. No
significant changes have occurred in the disclosures made in
Form 10-K for the fiscal year ended April 29, 1994 except
for a change in the computation of depreciation as discussed
below (refer to Form 10-K for a summary of significant
accounting policies followed in the preparation of the
consolidated financial statements).
2. Reclassifications
Certain 1994 amounts have been reclassified to conform with
the 1995 classification.
3. Depreciation Method
The Company adopted the straight-line depreciation method
for all property placed in service on or after April 30,
1994. Depreciation on property placed in service prior
to April 30, 1994 continues to be calculated principally
on accelerated methods. The Company believes the new
method will more accurately reflect its financial results
by better matching costs of new property over the useful
lives of the assets. In addition, the new method more
closely conforms with that prevalent in the industry.
The effect of the change was not material to the results
of the first quarter ended July 29, 1994.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Sales
Total sales for Bob Evans Farms, Inc. and Subsidiaries
increased 11% for the first quarter of fiscal 1995 as compared to
1994.
Most of the increased sales occurred in the restaurant
segment, which experienced sales growth of $15.5 million, or 12%,
due to more restaurants in operation and a 4% increase in same-
store sales. In the first quarter, the company opened eight new
restaurants and closed four restaurants, bringing the total
restaurants in operation to 319, compared to 293 at the end of
the prior year's first quarter.
Food products segment sales increased $4.0 million, or 8%,
due to increased volume of sausage products sold, higher
wholesale prices on sausage products, and a 21% increase in net
sales of Hickory Specialties' charcoal and liquid-smoke
flavorings.
Cost of Sales
As a percentage of sales, the consolidated cost of sales
remained virtually unchanged at 31.8% in the first quarter of
this year as compared to 32.0% last year. In the restaurant
segment, the first quarter cost of sales increased from 27.5% to
28.1% of sales as a result of various changes in product mix.
The food products segment cost of sales percentage decreased from
43.9% to 41.7% due almost entirely to lower live hog costs in the
first quarter of fiscal 1995.
Operating Expenses
Consolidated operating expenses were 41.9% and 41.3% of
sales in the first quarter of fiscal 1995 and 1994, respectively.
Restaurant segment operating expenses increased from 50.3% to
51.1% of sales in the first quarter of this year as compared to
the prior year primarily as a result of higher labor costs. In
the food products segment, the decrease in operating expenses as
a percentage of sales from 18.1% to 17.3% was the result of
higher wholesale prices on sausage products rather than a
discernible decrease in operating expenses.
Selling, General and Administrative Expenses
Consolidated selling, general and administrative expenses
represented 12.6% of net sales in the first quarter of fiscal
1995 as compared to 13.0% in the corresponding quarter a year
ago. There were no notable changes in the components of the
selling, general and administrative expenses between the first
quarter of last year and this year.
Net Interest
The change in net interest from a net interest expense of
$106,000 in the first quarter of fiscal 1994 to a net interest
income of $45,000 in the first quarter this year was the result
of $120,000 in nonrecurring payments to various state taxing
authorities last year for interest on balances due.
Net Income
Consolidated net income increased $1.4 million, or 12%, in
the first quarter this year as compared to the corresponding
quarter a year ago. Of this increase, 73% was attributable to
the food products segment's increases in sales volumes of
sausage, charcoal and liquid-smoke flavorings, lower live hog
costs associated with sausage products, and improved margins on
charcoal and liquid smoke products. The remaining increase
occurred in the restaurant segment as a result of more
restaurants in operation.
The increase in net income was somewhat reduced by an
increase in the effective tax rate from 37.2% in the first
quarter of fiscal 1994 to 38.4% in the first quarter of this
year. The increased tax provision was a result of the income tax
rate increase included as part of the 1993 Tax Act as well as an
expectation that the company's targeted jobs tax credit will be
reduced from that in the prior year.
Liquidity and Capital Resources
Cash generated from both the restaurant and food products
segments has been used as the main source of funds for working
capital and capital expenditure requirements. Bank lines of
credit have also been used for liquidity needs and capital
expansion at various times. At July 29, 1994, $2.5 million was
outstanding under such arrangements. The bank lines of credit
available total $53.0 million.
The company believes that the funds needed for capital
expenditures and working capital during the remainder of fiscal
1995 will be generated internally and from available bank lines
of credit. Longer-term financing alternatives will be evaluated
by the company, especially in the event of acquisitions.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
18. Changes in accounting principles
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
Bob Evans Farms, Inc.
Registrant
<Daniel E. Evans>
Daniel E. Evans
Chairman of the Board
(Chief Executive Officer)
<Donald J. Radkoski>
Donald J. Radkoski
Group Vice President and Treasurer
(Chief Financial Officer)
September 9, 1994
Date
Exhibit 18. Changes in Accounting Principles
Board of Directors
Bob Evans Farms, Inc.
3776 South High Street
Columbus, Ohio 43207
Note 3 of notes to condensed consolidated financial statements of
Bob Evans Farms, Inc. included in its Form 10Q for the 13 weeks
ended July 29, 1994 describes a change in the method of
accounting for depreciation of buildings and equipment.
Effective April 30, 1994 the company adopted the straight-line
method of depreciation for all buildings and equipment placed in
service on or after that date. Buildings and equipment placed in
service prior to fiscal 1995 are depreciated using principally
the declining balance method. You have advised us that you
believe that the change is to a preferable method in your
circumstances because the new method will more accurately reflect
the company's financial results by better matching costs of new
property over the useful lives of these assets. In addition the
new method more closely conforms with that prevalent in the
industry.
There are no authoritative criteria for determining a preferable
depreciation method based on the particular circumstances;
however, we conclude that the change in the method of accounting
for depreciating buildings and equipment is to an acceptable
alternative method which, based on your business judgment to make
this change for the reason cited above, is preferable in your
circumstances. We have not conducted an audit in accordance with
generally accepted auditing standards of any financial statements
of the company as of any date or for any period subsequent to
April 29, 1994, and therefore we do not express any opinion on
any financial statements of Bob Evans Farms, Inc. subsequent to
that date.
Very truly yours,
<Ernst & Young>
