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 January 26, 1996
--------------------------------------------
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.
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BOB EVANS FARMS, INC.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(Dollars in Thousands)
January 26, 1996 April 28, 1995
Unaudited Audited
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Current Assets
Cash and equivalents ........................... $ 5,935 $ 10,451
Accounts receivable ............................ 14,170 15,570
Inventory ...................................... 19,600 17,256
Deferred income taxes .......................... 6,162 6,162
Prepaid expenses ............................... 4,136 2,936
-------- --------
Total Current Assets ..................... 50,003 52,375
Property, Plant, and Equipment, at Cost .............. 702,365 594,390
Less accumulated depreciation .................. 241,381 177,542
-------- --------
Net Property, Plant and Equipment ........ 460,984 416,848
Other Assets
Deposits and other ............................. 2,677 2,243
Long-term investments .......................... 4,444 2,303
Deferred income taxes .......................... 1,573 1,573
Cost in excess of net assets acquired .......... 10,612 11,016
Other intangible assets ........................ 1,507 1,743
-------- --------
Total Other Assets ....................... 20,813 18,878
-------- --------
$531,800 $488,101
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Line of credit ................................. $ 52,305 $ 25,600
Accounts payable ............................... 7,019 7,325
Dividends payable .............................. 3,386 3,068
Federal and state income taxes ................. 2,558 4,633
Accrued wages and related liabilities .......... 13,070 13,691
Other accrued expenses ......................... 26,995 31,253
-------- --------
Total Current Liabilities ................ 105,333 85,570
Long-Term Liabilities
Deferred income taxes .......................... 6,409 6,409
Notes payable (net of discount of
$481,000 at January 26, 1996 and
$600,000 at April 28, 1995).................. 2,369 2,250
-------- --------
8,778 8,659
Stockholders' Equity
Common stock, $.01 par value
Authorized: 100,000,000 shares;
issued 42,638,118 shares
at January 26, 1996, and April 28, 1995 ..... 426 426
Capital in excess of par value ................. 145,114 144,741
Retained earnings .............................. 277,783 252,961
-------- --------
423,323 398,128
Less treasury stock: 367,052 shares
at January 26, 1996 and 309,620 shares
at April 28, 1995, at cost .................. 5,634 4,256
-------- --------
Total Stockholders' Equity ............... 417,689 393,872
-------- --------
$531,800 $488,101
======== ========
The accompanying notes are an integral part of the financial statements.
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BOB EVANS FARMS, INC.
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
(Dollars in Thousands Except Net Income
Per Share and Cash Dividend Amounts)
Three Months Ended Nine Months Ended
Jan. 26, 1996 Jan. 27, 1995 Jan. 26, 1996 Jan. 27, 1995
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Net sales .................................. $ 194,740 $ 185,587 $ 608,302 $ 577,929
Cost of sales .............................. 60,162 52,325 184,663 172,571
Operating wage and fringe benefit expenses . 60,898 54,974 184,766 168,868
Other operating expenses ................... 28,103 24,767 84,761 75,525
Selling, general and administrative expenses 26,210 24,349 77,214 75,169
Depreciation expense ....................... 6,978 6,575 20,182 18,880
------------ ----------- ------------ -----------
Operating Profit ..................... 12,389 22,597 56,716 66,916
Net interest ............................... (23) 66 (19) 109
------------ ----------- ------------ -----------
Income Before Income Taxes ........... 12,366 22,663 56,697 67,025
Provisions for income taxes
Federal ................................ 3,941 7,255 17,830 21,121
State .................................. 848 1,504 3,883 4,654
------------ ----------- ------------ -----------
4,789 8,759 21,713 25,775
------------ ----------- ------------ -----------
Net Income ........................... $ 7,577 $ 13,904 $ 34,984 $ 41,250
============ =========== ============ ===========
Weighted average number of common
shares outstanding ................... 42,324,758 42,159,394 42,324,758 42,159,394
============ =========== ============ ===========
Net income per common share based upon
the weighted average number of
common shares ........................ $ .18 $ .33 $ .83 $ .98
============ =========== ============ ===========
Cash dividend per common share ............. $ .0800 $ .0725 $ .2400 $ .2175
============ =========== ============ ===========
The accompanying notes are an integral part of the financial statements.
</TABLE>
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<TABLE>
BOB EVANS FARMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(Dollars in Thousands)
Nine months Ended
January 26, 1996 January 27, 1995
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Operating activities:
Net income ......................................... $ 34,984 $ 41,250
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization ...................... 20,821 19,520
Loss (gain) on sale of property
and equipment ................................... 67 (47)
Compensation expense attributable
to stock plans .................................. 541 789
Cash provided by (used for) current
assets and current liabilities:
Accounts receivable .......................... 1,400 770
Inventories .................................. (2,344) (233)
Prepaid expenses ............................. (1,200) 115
Accounts payable ............................. (306) (4,684)
Federal and state income taxes ............... (2,075) (3,964)
Accrued wages and related liabilities ........ (788) 1,012
Other accrued expenses ....................... (4,258) 9,296
-------- --------
Net cash provided by operating ......... 46,842 63,824
activities
Investing activities:
Purchase of property, plant and equipment .......... (64,714) (67,839)
Purchase of investments ............................ (2,141) (2,303)
Proceeds from sale of property, plant and .......... 330 258
equipment
Proceeds from sale of investments .................. 1,318
Other .............................................. (434) (282)
-------- --------
Net cash used in investing ............. (66,959) (68,848)
activities
Financing activities:
Cash dividends paid ................................ (9,843) (8,957)
Draws on line of credit ............................ 26,705 7,300
Purchase of treasury stock ......................... (2,091) 0
Proceeds from issuance of note payable ............. 2,303
Interest accrued on long-term notes ................ 119
Distribution of treasury stock
due to the exercise of stock
options and employee bonuses .................... 711 1,172
-------- --------
Net cash provided by financing ......... 15,601 1,818
activities
-------- --------
Decrease in cash and equivalents ................... (4,516) (3,206)
Cash and equivalents at the beginning
of the period ................................... 10,451 6,699
-------- --------
Cash and equivalents at the end of the period ...... $ 5,935 $ 3,493
======== ========
The accompanying notes are an integral part of the financial statements.
</TABLE>
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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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 28, 1995
(refer to Form 10-K for a summary of significant accounting policies
followed in the preparation of the consolidated financial statements).
2. Reclassifications
Certain fiscal 1995 amounts have been reclassified to conform with
the fiscal 1996 classification.
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-11-
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Sales
Consolidated net sales for Bob Evans Farms, Inc. increased $9.2 million,
or 4.9% in the third quarter ended January 26, 1996 as compared to the
corresponding quarter a year ago. Of this increase, $7.4 million occurred in
the restaurant segment. Year-to-date sales increased $30.4 million, or 5.3%,
which was comprised of a $30.1 million increase in the restaurant segment and
a $0.3 million increase in the food products segment.
In the restaurant segment, the sales increases ($7.4 million, or 5.8%
for the quarter; $30.1 million, or 7.2% year-to-date) are the result of more
restaurants in operation: 383 restaurants at Jan. 26, 1996 compared to 334 a
year ago. During the third quarter, the company opened a total of 10 new
restaurants six "small-town" restaurants and four traditional restaurants. One
traditional restaurant was closed in January due to less-than-expected
performance. The company opened a total of 30 new restaurants through the
first three quarters of this fiscal year. The increase in sales brought about
by this expansion was partially offset by a decrease in same-store sales for
core restaurants of 2.8% in the third quarter and 1.9% year-to-date. (Core
restaurants are restaurants that have been open two full years.) Severe winter
weather during the third quarter of this year was a contributing factor to the
decrease in same-store sales. The average menu price increase amounted to 2.7%
for the quarter and 3.2% year-to-date.
In the food products segment, sales were up $1.7 million (3.0%) for the
quarter and were flat year-to-date. In the third quarter, there was a 5.0%
increase in comparable pounds of sausage sold. This increased volume, in
addition to higher prices ( the retail price of the benchmark one-pound roll
sausage was $2.79 versus $2.69 a year ago) led to the sales increase. The
increase generated by sausage sales was mitigated by lower sales of salad and
charcoal products, which were $1.1 million less, in total, in the third
quarter as compared to the corresponding quarter a year ago. Year-to-date,
sales of sausage products were up $3.5 million, whereas sales of salad and
charcoal products were down $3.2 million, mainly due to lower charcoal sales
at Hickory Specialties.
<PAGE>
Cost of Sales
Consolidated cost of sales (cost of materials only) was 30.9% of sales
in the third quarter compared to 28.2% of sales in the third quarter a year
ago. Year-to-date, consolidated cost of sales represented 30.4% of sales
versus 29.9% last fiscal year.
In the restaurant segment, food cost (cost of sales) was 27.0% and 26.7%
of sales in the third quarter and year-to-date, respectively, versus 26.7% and
27.3% in the corresponding periods a year ago.
In the food products segment, cost of sales was 40.0% of sales for the
quarter and 40.4% year-to-date compared to 31.6% and 36.5%, respectively, for
the corresponding periods a year ago. These increases (particularly in the
third quarter) compared to last year were due primarily to changes in hog
costs, which averaged $36.00 per hundredweight versus $24.00 per hundredweight
in the third quarters of fiscal 1996 and 1995, respectively.
Operating Wage and Fringe Benefit Expenses
Consolidated operating wage and fringe benefit expenses increased from
29.6% to 31.3% of sales in the third quarter and from 29.2% to 30.4% of sales
year-to-date in comparison to the corresponding periods last year.
In the restaurant segment, wages and fringes represented 39.2% of sales
for the quarter and 36.8% of sales year-to-date versus 37.3% and 35.9% for the
corresponding periods a year ago. The increases, particularly in the third
quarter, are due primarily to higher hourly labor costs in addition to higher
health insurance costs.
In the food products segment, wages and fringes represented 12.5% of
sales for the quarter and 12.8% of sales year-to-date versus 11.9% and 12.2%
for the corresponding periods a year ago.
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Other Operating Expenses
Approximately 90% of other operating expenses are in the restaurant
segment; the most significant components of which are advertising, utilities,
repair and maintenance, restaurant supplies, and taxes (other than income
taxes). Consolidated other operating expenses represented 14.4% of sales for
the quarter and 13.9% of sales year-to-date in comparison to 13.3% and 13.1%
for the corresponding periods last year. These increases are due mostly to an
increase in restaurant advertising expenses of $0.8 million for the quarter
and $4.1 million year-to-date. Third quarter operating expenses were also
negatively impacted by increases in utilities expense and repair and
maintenance expense in the restaurant segment.
Selling, General and Administrative Expenses
Consolidated selling, general and administrative expenses represented
13.5% of sales for the quarter and 12.7% of sales year-to-date in comparison
to 13.1% and 13.0%, respectively, in the corresponding periods a year ago. The
most significant components of selling, general and administrative expenses
are wages and fringe benefits and food products segment promotional expenses.
Net Income
Consolidated net income decreased $6.3 million, or 45.5%, in the third
quarter in comparison to the corresponding period a year ago. Of the decrease,
$2.5 million occurred in the food products segment, which experienced
decreased margins as a result of significantly higher hog costs (50.0% higher
than the record-low hog costs experienced in the third quarter last year) and
lower margins at Hickory Specialties brought about by decreased sales of
charcoal products. The food products segment pre-tax profit margin for the
quarter was 9.9% this year versus 17.5% last year.
In the restaurant segment, third-quarter net income declined $3.8
million (or 48.3%), and the pre-tax profit margin for the quarter fell from
9.9% to 4.8%. The decrease was attributable to decreases in same-store sales
and increases in hourly labor costs, health insurance expense, and operating
expenses such as advertising and utilities.
Liquidity and Capital Resources
Cash generated from both the restaurant and food products segments has
been used as the main source of working capital and capital expenditures. Bank
lines of credit were also used for liquidity needs and capital expansion at
various times. The total of bank lines of credit available is $124.4 million,
of which $52.3 million was outstanding at January 26, 1996.
The company believes that funds needed for capital expenditures and
working capital during the remainder of fiscal 1996 will be generated both
internally and from available bank lines of credit. Longer-term financing
alternatives will be evaluated by the company, especially in the event of
acquisitions.
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
(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
Chairman of the Board
(Chief Executive Officer)
Donald J. Radkoski
Group Vice President and Treasurer
(Chief Financial Officer)
March 8, 1996
-------------
Date
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<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated balance sheets and statements of income of Bob Evans
Farms, Inc. and is qualified in its entirety by reference to such Form 10-Q
for the period ended January 26, 1996.
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-26-1996
<PERIOD-START> APR-29-1995
<PERIOD-END> JAN-26-1996
<EXCHANGE-RATE> 1
<CASH> 5,935
<SECURITIES> 0
<RECEIVABLES> 14,170
<ALLOWANCES> 0
<INVENTORY> 19,600
<CURRENT-ASSETS> 50,003
<PP&E> 702,365
<DEPRECIATION> 241,381
<TOTAL-ASSETS> 531,800
<CURRENT-LIABILITIES> 105,333
<BONDS> 0
0
0
<COMMON> 426
<OTHER-SE> 417,263
<TOTAL-LIABILITY-AND-EQUITY> 531,800
<SALES> 608,302
<TOTAL-REVENUES> 608,302
<CGS> 184,663
<TOTAL-COSTS> 551,586
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19
<INCOME-PRETAX> 56,697
<INCOME-TAX> 21,713
<INCOME-CONTINUING> 34,984
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34,984
<EPS-PRIMARY> 0.83
<EPS-DILUTED> 0.83
</TABLE>
