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 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.
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(Exact name of registrant as specified in its charter)
Delaware 31-4421866
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
3776 South High Street Columbus, Ohio 43207
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(Address of principal executive offices)
(Zip Code)
(614) 491-2225
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(Registrant's telephone number, including area code)
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(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)
July 26, 1996 April 26, 1996
------------- --------------
Unaudited Audited
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Current Assets
Cash and equivalents ................................... $ 22,143 $ 14,369
Accounts receivable .................................... 17,464 14,509
Inventories ............................................ 21,457 20,876
Deferred income taxes .................................. 5,882 5,882
Prepaid expenses ....................................... 4,379 3,263
-------- --------
Total Current Assets ......................... 71,325 58,899
Property, Plant, and Equipment, at cost ........................... 654,490 646,849
Less accumulated depreciation .......................... 202,413 199,606
-------- --------
Net Property, Plant and Equipment ............ 452,077 447,243
Other Assets
Deposits and other ..................................... 2,573 2,955
Long-term investments .................................. 5,065 4,893
Deferred income taxes .................................. 9,918 9,918
Cost in excess of net assets acquired .................. 10,343 10,477
Other intangible assets ................................ 1,349 1,428
-------- --------
Total Other Assets ........................... 29,248 29,671
-------- --------
$552,650 $535,813
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Line of credit ......................................... $ 68,055 $ 59,655
Accounts payable ....................................... 7,495 5,940
Dividends payable ...................................... 3,375 3,382
Federal and state income taxes ......................... 4,240 535
Accrued wages and related liabilities .................. 9,638 14,245
Other accrued expenses ................................. 36,205 32,674
-------- --------
Total Current Liabilities .................... 129,008 116,431
Long-Term Liabilities
Deferred income taxes .................................. 8,300 8,300
Notes payable (net of discount of $407,000 at
July 26, 1996 and $443,000 at April 26, 1996) ....... 1,963 1,927
-------- --------
10,263 10,227
Stockholders' Equity
Common stock: $.01 par value; authorized 100,000,000
shares; issued 42,638,118 shares at July 26, 1996 and
April 26, 1996 ...................................... 426 426
Preferred stock: authorized 1,200 shares; issued 120
shares at July 26, 1996 and April 26, 1996 .......... 60 60
Capital in excess of par value ......................... 145,622 145,584
Retained earnings ...................................... 274,198 268,677
-------- --------
420,306 414,747
Less treasury stock: 448,255 shares
at July 26, 1996 and 362,875 shares
at April 26, 1996, at cost .......................... 6,927 5,592
-------- --------
Total Stockholders' Equity ................... 413,379 409,155
-------- --------
$552,650 $535,813
======== ========
The accompanying notes are an integral part of the financial statements.
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BOB EVANS FARMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
(Dollars in Thousands Except Net Income
Per Share and Cash Dividend Amounts)
Thirteen Weeks Ended
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July 26, 1996 July 28, 1995
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Net Sales ........................................ $ 213,060 $ 205,862
Cost of sales .................................... 67,973 61,153
Operating wage and fringe benefit expenses ....... 67,579 61,431
Other operating expenses ......................... 29,723 28,344
Selling, general and administrative expenses ..... 26,838 25,280
Depreciation expense ............................. 6,771 6,442
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Operating Profit ...................... 14,176 23,212
Net interest ..................................... 66 46
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Income Before Income Taxes ............ 14,242 23,258
Provisions for income taxes
Federal ....................................... 4,372 7,262
State ......................................... 969 1,599
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5,341 8,861
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Net Income ............................ $ 8,901 $ 14,397
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Weighted average number of common
shares outstanding............................. 42,273,714 42,346,513
=========== ===========
Net income per common share based upon
the weighted average number of
common shares outstanding ............. $ .21 $ .34
=========== ===========
Cash dividend per common share ................... $ .08 $ .08
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BOB EVANS FARMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(Dollars in Thousands)
Thirteen Weeks Ended
------------------------
July 26,1996 July 28, 1995
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Operating activities:
Net income ......................................................... $ 8,901 $ 14,397
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ...................................... 6,984 6,656
Loss (gain) on sale of property and equipment ...................... 99 (16)
Compensation expense attributable to stock plans ................... 30 241
Cash provided by (used for) current assets and
current liabilities:
Accounts receivable ..................................... (2,955) 1,204
Inventories ............................................. (581) 550
Prepaid expenses ........................................ (1,116) (1,033)
Accounts payable ........................................ 1,555 816
Federal and state income taxes .......................... 3,705 7,247
Accrued wages and related liabilities ................... (4,637) (4,338)
Other accrued expenses .................................. 3,531 (182)
-------- --------
Net cash provided by operating activities ..... 15,516 25,542
Investing activities:
Purchase of property, plant and equipment .......................... (11,747) (24,777)
Purchase of investments ............................................ (172) (1,539)
Proceeds from sale of property, plant and equipment ................ 43 67
Other .............................................................. 382 (65)
-------- --------
Net cash used in investing activities ......... (11,494) (26,314)
Financing activities:
Cash dividends paid ................................................ (3,387) (3,069)
Draws on line of credit ............................................ 8,400 5,500
Purchase of treasury stock ......................................... (1,827) (829)
Interest accrued on long-term notes ................................ 36 36
Distribution of treasury stock due to the exercise
of stock options and employee bonuses ........................ 530 541
-------- --------
Net cash provided by financing activities ..... 3,752 2,179
-------- --------
Increase (decrease) in cash and equivalents ........................ 7,774 1,407
Cash and equivalents at the beginning of the period ................ 14,369 10,451
-------- --------
Cash and equivalents at the end of the period ...................... $ 22,143 $ 11,858
======== ========
The accompanying notes are an integral part of the financial statements.
</TABLE>
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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 26, 1996 (refer to Form 10-K for a
summary of significant accounting policies followed in the preparation of the
consolidated financial statements).
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Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Sales
Consolidated net sales for Bob Evans Farms, Inc. increased $7.2 million,
or 3.5%, for the first quarter ended July 26, 1996 as compared to the
corresponding quarter a year ago. The increase was comprised of a $2.7 million
increase in the restaurant segment and a $4.5 million increase in the food
products segment.
The $2.7 million (1.8%) sales increase in the restaurant segment was due
entirely to more restaurants in operation: 390 restaurants at the end of this
quarter compared to 361 at the end of the first quarter last year. During this
quarter, the company opened five new restaurants (all "small-town" Bob Evans
Restaurants), and closed five existing restaurants (three traditional
restaurants, one General Store and one Cantina del Rio). The increase in sales
was partially offset by a 3.2% decrease in same-store sales for core
restaurants (restaurants that have been open two full years) in the first
quarter. The average menu price increase in the first quarter amounted to
1.3%.
The $4.5 million (8.6%) sales increase in the food products segment was
due mostly to higher sales of charcoal products and liquid-smoke flavorings at
Hickory Specialties, which experienced a sales increase of $2.8 million. The
remaining increase was the result of wholesale price increases of sausage
products, which experienced a 2.0% decline in sales volume.
Cost of Sales
Consolidated cost of sales (cost of materials only) represented 31.9% of
sales in the first quarter of fiscal 1997 compared to 29.7% of sales in the
first quarter of fiscal 1996. In the restaurant segment, food cost (cost of
sales) was 26.6% of sales in this year's first quarter, which was generally
consistent with 26.5% of sales in last year's first quarter. Food products
segment cost of sales increased considerably from 39.0% of sales in this first
quarter last year to 46.5% of sales in this year's first quarter. The
deterioration in the food products segment was due entirely to higher hog
costs, which averaged $32.00 per hundredweight in the first quarter of fiscal
1996 versus $46.90 per hundredweight in the first quarter of fiscal 1997. This
increase in hog costs of 46.6% was not fully absorbed by price increases of
the company's sausage products, resulting in a $4.2 million decrease in
operating profit.
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Operating Wage and Fringe Benefit Expenses
Consolidated operating wage and fringe benefit expenses increased from
29.8% of sales in the first quarter of fiscal 1996 to 31.7% of sales in the
first quarter of fiscal 1997. In the restaurant segment, operating wage and
fringe benefit expenses represented 38.6% of sales for the first three months
of this year versus 35.7% for the comparable period a year ago. In the food
products segment, the comparison was 12.8% versus 12.7%. The increase in the
restaurant segment was due to higher managerial costs and higher health
insurance expense. Also impacting the increase in the ratio of wages and
fringes to sales in the restaurant segment was the decrease in same-store
sales discussed above.
Other Operating Expenses
Approximately 90% of other operating expenses were in the restaurant
segment; the most significant components of which were advertising, utilities,
repair and maintenance, restaurant supplies and taxes (other than income
taxes). Consolidated other operating expenses, as a percent of sales,
increased in the first quarter of fiscal 1997 to 14.0% compared to 13.8% in
the first quarter a year ago. Increases in utilities expense and repair and
maintenance expense contributed to the increase, although not substantially.
The increase in other operating expenses as a percentage of sales was more a
function of the fixed nature of the expenses combined with decreased
same-store sales than actual increases in the expenses per se.
Selling, General and Administrative Expenses
Consolidated selling, general and administrative expenses represented
12.6% of sales in the quarter versus 12.3% of sales in the first quarter a
year ago. The most significant components of selling, general and
administrative expenses were wages and fringe benefits and food products
segment promotional expenses. The increase in the first quarter of fiscal 1997
was due mostly to increased promotional expenses associated with charcoal
products and sausage.
Net Income
Consolidated net income decreased $5.5 million, or 38.2%, in the first
quarter in comparison to the corresponding period a year ago. Profit decreased
$3.0 million, or 26.7%, in the restaurant segment as a result of the decrease
in same-store sales as well as increased labor and health insurance costs.
Food products segment net income decreased $2.5 million, or 82.0%, and pre-tax
profit margin decreased from 8.0% to 1.3%. The unfavorable results in the food
products segment were the direct result of the substantial increase in live
hog costs.
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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 expenditure
requirements. Bank lines of credit were also used for liquidity needs and
capital expansion at various times. The total bank lines of credit available
is $124.4 million, of which $68.1 million was outstanding at July 26, 1996.
The company believes that funds needed for capital expenditures and
working capital during the remainder of fiscal 1997 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.
Subsequent Events
On August 5, 1996 the company closed its remaining 14 Cantina del Rio
Mexican Restaurants. There was no charge to earnings as a result of the
closings. The company entered into lease arrangements with entities affiliated
with the Rio Bravo Cantina Restaurant concept for seven of the closed
locations. The initial terms of the leases range from 10 to 20 years, and each
has provisions for renewal options. The company intends to sell or lease the
remaining locations.
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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)
September 5, 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 JULY 26, 1996.
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-25-1997
<PERIOD-START> APR-27-1996
<PERIOD-END> JUL-26-1996
<EXCHANGE-RATE> 1
<CASH> 22,143
<SECURITIES> 0
<RECEIVABLES> 17,464
<ALLOWANCES> 0
<INVENTORY> 21,457
<CURRENT-ASSETS> 71,325
<PP&E> 654,490
<DEPRECIATION> 202,413
<TOTAL-ASSETS> 552,650
<CURRENT-LIABILITIES> 129,008
<BONDS> 0
0
60
<COMMON> 426
<OTHER-SE> 412,893
<TOTAL-LIABILITY-AND-EQUITY> 552,650
<SALES> 213,060
<TOTAL-REVENUES> 213,126
<CGS> 67,973
<TOTAL-COSTS> 172,046
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 14,242
<INCOME-TAX> 5,341
<INCOME-CONTINUING> 8,901
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,901
<EPS-PRIMARY> 0.21
<EPS-DILUTED> 0.21
</TABLE>
