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 24, 1997
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 24, 1997 April 26, 1996
---------------- --------------
Unaudited Audited
<S> <C> <C>
Current Assets
Cash and equivalents $ 8,144 $ 14,369
Accounts receivable 16,918 14,509
Inventory 23,907 20,876
Deferred income taxes 5,882 5,882
Prepaid expenses 3,779 3,263
-------- --------
Total Current Assets 58,630 58,899
Property, Plant, and Equipment, at Cost 676,966 646,849
Less accumulated depreciation 209,269 199,606
-------- --------
Net Property, Plant and Equipment 467,697 447,243
Other Assets
Deposits and other 3,188 2,955
Long-term investments 5,341 4,893
Deferred income taxes 9,918 9,918
Cost in excess of net assets acquired 10,073 10,477
Other intangible assets 1,192 1,428
-------- --------
Total Other Assets 29,712 29,671
-------- --------
$556,039 $535,813
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Line of credit $ 69,625 $ 59,655
Accounts payable 7,197 5,940
Dividends payable 3,340 3,382
Federal and state income taxes 1,250 535
Accrued wages and related liabilities 12,485 14,245
Other accrued expenses 33,293 32,674
-------- --------
Total Current Liabilities 127,190 116,431
Long-Term Liabilities
Deferred income taxes 8,300 8,300
Notes payable (net of discount of
$335,000 at January 24, 1997
and $443,000 at April 26, 1996) 2,035 1,927
-------- --------
Total Long-Term Liabilities 10,335 10,227
Stockholders' Equity
Common stock, $.01 par value; authorized
100,000,000 shares; issued 42,638,118
shares at January 24, 1997 and
April 26, 1996 426 426
Preferred stock: authorized 1,200 shares;
issued 120 shares at January 24, 1997
and April 26, 1996 60 60
Capital in excess of par value 145,711 145,584
Retained earnings 284,979 268,677
-------- --------
431,176 414,747
Less treasury stock: 891,793 shares at
January 24, 1997 and 362,875 shares
at April 26, 1996, at cost 12,662 5,592
-------- --------
Total Stockholders' Equity 418,514 409,155
-------- --------
$556,039 $535,813
======== ========
The accompanying notes are an integral part of the financial statements.
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<TABLE>
BOB EVANS FARMS, INC.
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. 24, 1997 Jan. 26, 1996 Jan. 24, 1997 Jan. 26, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 199,189 $ 194,740 $ 618,493 $ 608,302
Cost of sales 66,169 60,162 200,574 184,663
Operating wage and fringe benefit expenses 62,200 60,898 193,943 184,766
Other operating expenses 27,392 28,103 85,785 84,761
Selling, general and administrative expenses 23,865 26,210 75,591 77,214
Depreciation expense 7,121 6,978 20,944 20,182
------------ ------------ ------------ ------------
Operating Profit 12,442 12,389 41,656 56,716
Net interest (194) (23) 89 (19)4
------------ ------------ ------------ ------------
Income Before Income Taxes 12,248 12,366 41,745 56,697
Provisions for income taxes
Federal 3,624 3,941 12,591 17,830
State 818 848 2,765 3,883
------------ ------------ ------------ ------------
4,442 4,789 15,356 21,713
------------ ------------ ------------ ------------
Net Income $ 7,806 $ 7,577 $ 26,389 $ 34,984
============ ============ ============ ============
Weighted average number of common
shares outstanding 42,084,834 42,324,758 42,084,834 42,324,758
============ ============ ============ ============
Net income per common share based upon
the weighted average number of
common shares outstanding $ .19 $ .18 $ .63 $ .83
============ ============ ============ ============
Cash dividends per common share $ .08 $ .08 $ .24 $ .24
============ ============ ============ ============
The accompanying notes are an integral part of the financial statements.
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<TABLE>
BOB EVANS FARMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(Dollars in Thousands)
Nine Months Ended
January 24, 1997 January 26, 1996
---------------- ----------------
<S> <C> <C>
Operating activities:
Net income $ 26,389 $ 34,984
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 21,584 20,821
Loss (gain) on sale of property and equipment (242) 67
Compensation expense attributable to stock plans 137 541
Cash provided by (used for) current assets
and current liabilities:
Accounts receivable (2,409) 1,400
Inventories (3,031) (2,344)
Prepaid expenses (516) (1,200)
Accounts payable 1,257 (306)
Federal and state income taxes 715 (2,075)
Accrued wages and related liabilities (1,897) (788)
Other accrued expenses 619 (4,258)
-------- --------
Net cash provided by operating 42,606 46,842
activities
Investing activities:
Purchase of property, plant and equipment (41,473) (64,714)
Purchase of investments (448) (2,141)
Proceeds from sale of property, plant and equipment 317 330
Other (233) (434)
-------- --------
Net cash used in investing activities (41,837) (66,959)
Financing activities:
Cash dividends paid (10,129) (9,843)
Draws on line of credit 9,970 26,705
Purchase of treasury stock (7,476) (2,091)
Interest accrued on long-term notes 108 119
Distribution of treasury stock
due to the exercise of stock
options and employee bonuses 533 711
-------- --------
Net cash provided by (used in) (6,994) 15,601
-------- --------
Increase (decrease) in cash and equivalents (6,225) (4,516)
Cash and equivalents at the beginning of the 14,369 10,451
period -------- --------
Cash and equivalents at the end of the period $ 8,144 $ 5,935
======== ========
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 approximately
$4.4 million, or 2.3%, in the third quarter ended January 24, 1997 compared to
the corresponding quarter last year. This increase was comprised of a $2.7
million sales increase in the restaurant segment, and a $1.7 million sales
increase in the food products segment. Through the first nine months of fiscal
1997, consolidated net sales rose $10.2 million, or 1.7%, which was comprised of
a $2.8 million increase in the restaurant segment, and a $7.4 million increase
in the food products segment.
In the restaurant segment, third quarter sales increased $2.7 million, or
2.0%. Excluding the Cantina del Rio Mexican restaurant concept which the Company
closed in August, 1996, third quarter sales increased $7.6 million, or 5.7%.
Sales improved due to more restaurants in operation and a 0.8% increase in
same-store sales. At the end of the third quarter, the company had 387 stores in
operation, compared to 383 last year (368 excluding the Cantina del Rios). The
chart below summarizes the openings and closings during the last seven quarters:
SUMMARY OF RESTAURANTS OPENED AND CLOSED
Beginning Opened Closed Ending
----------- -------- -------- --------
Fiscal 1996
1st quarter 354 7 0 361
2nd quarter 361 13 0 374
3rd quarter 374 10 1 383
4th quarter 383 7 0 390
Fiscal 1997
1st quarter 390 5 5 390
2nd quarter 390 7 14 383
3rd quarter 383 4 0 387
The 0.8% same-store sales increase this past quarter was the company's
first quarterly increase since the fourth quarter of fiscal 1995. Although the
same-store sales increase is partly attibutable to severe winter weather in
January 1996, the company's same-store trends have steadily improved since
August 1996. Through nine months, same-store sales decreased 2.0%, which
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partially offset the additional sales created by new units and resulted in a
$2.8 million increase in year-to-date sales. The average menu price increase
amounted to 2.1% for the quarter and 1.6% through nine months.
In the food products segment, sales increased $1.7 million (3.0%) for the
quarter and $7.4 million (4.6%) through nine months. These gains reflected
sausage price increases intended to mitigate the impact of high hog costs. The
suggested retail price of the benchmark one-pound roll sausage was $3.09 during
the third quarter compared to $2.79 a year ago. Comparable pounds of sausage
products sold declined 7% in the third quarter and 5% through nine months. The
company believes these declines were impacted by the retail price increases of
its products.
Also impacting the sales increases in the food products segment were higher
sales of charcoal products. Sales at Hickory Specialties increased $0.5 million
for the quarter and $3.9 million through nine months as a result of aggressive
promotions. Sales of salad products have not changed appreciably.
Cost of Sales
Consolidated cost of sales (cost of materials only) was 33.2% of sales in
the third quarter compared to 30.9% last year. Through nine months, consolidated
cost of sales represented 32.4% of sales versus 30.4% last fiscal year.
In the restaurant segment, food cost was 26.6% of sales in the third
quarter and 26.7% of sales year-to-date, versus 27.0% and 26.7%, respectively,
in the corresponding periods last year.
In the food products segment, cost of sales was 48.7% of sales for the
quarter and 47.5% through nine months compared to 40.0% and 40.4%, respectively,
for the corresponding periods a year ago. These increases were due to
significant increases in hog costs, which averaged $54.00 per hundredweight in
the third quarter of this year versus $36.00 last year, a 50% increase. The
increased hog costs were not fully absorbed by price increases of the company's
sausage products, ultimately leading to an estimated decline in operating profit
of $5.2 million in the third quarter and $12.1 million through nine months.
Although the company has raised its prices three times in the last year to help
mitigate the tremendous rise in hog costs, the price increases have been limited
in order to preserve market share.
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Operating Wage and Fringe Benefit Expenses
Consolidated operating wage and fringe benefit expenses represented 31.2%
of sales for the quarter and 31.4% of sales through nine months compared to
31.3% and 30.4%, respectively, in the corresponding periods a year ago.
In the restaurant segment, wages and fringes were 39.5% versus 39.2% of
sales for the quarter, and 38.6% versus 36.8% of sales through nine months. The
increases were the result of higher hourly labor costs (partially due to the
increased minimum wage), higher managerial costs and increased health insurance
expense. Specifically affecting the year-to-date comparison were labor costs
associated with closing 19 restaurants this fiscal year, 15 of which were
Cantina del Rios.
In the food products segment, wages and fringes were 11.8% versus 12.5% of
sales for the quarter, and 12.3% versus 12.8% of sales through nine months. The
improvement in these ratios was due to the fact that the increases in food
products sales were primarily the result of price increases rather than
increased production. The volume of sausage produced was down for both the
quarter and year-to-date.
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 represented 13.8% versus 14.4% of
sales for the quarter, and 13.9% of sales for both nine-month periods. The
improvement in the quarter was partially the result of lower advertising costs
in the restaurant segment as well as the closing of the Ft. Worth production
plant. The Ft. Worth plant was closed in late October, with its production lines
shifted to other existing plants.
Selling, General and Administrative Expenses
Consolidated selling, general and administrative expenses represented 12.0%
versus 13.5% of sales for the quarter, and 12.2% versus 12.7% of sales for the
nine-month period. The most significant components of selling, general and
administrative expenses were wages and fringe benefits and food products
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promotional expenses. Increases in promotional expenses at Hickory Specialties
were offset by large decreases in corporate administrative costs for both the
quarter and nine-month period.
Net Income
Consolidated net income increased $0.2 million, or 3.0%, in the third
quarter in comparison to the corresponding quarter a year ago. In the restaurant
segment, the improvement in same-store sales combined with large decreases in
administrative expenses led to a $2.6 million (62.1%) increase in quarterly net
income. Excluding the losses posted by the Cantina del Rio restaurants last
year, net income improved 43.2%. Food products segment net income decreased $2.3
million, or 67.3%, and its pre-tax margin fell from 9.9% to 3.1%. The
unfavorable results in the food products segment were the direct result of
rapidly rising hog costs, and to a lesser extent, promotional and other expenses
associated with Hickory Specialties' new charcoal plant.
Through nine months, consolidated net income was down $8.6 million, or
24.6%. The most significant factor in this decline was the extraordinarily high
hog costs. Additional factors were decreased same-store sales in the restaurant
segment and expenses at Hickory Specialties.
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 $69.6 was outstanding at January 24, 1997.
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.
____________________
Safe Harbor Statement under the Private Securities Litigation Act of 1995: The
statements contained in this filing which are not historical fact are
"forward-looking statements" that involve various important risks, uncertainties
and other factors which could cause the company's actual results for 1997 and
beyond to differ materially from those expressed in such forward-looking
statements. These important factors include continuing high hog costs and the
possibility of severe winter weather conditions where the company operates its
restaurants, as well as other risks previously disclosed in the company's
securities filings.
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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 7, 1997
___________________
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 24, 1997.
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-25-1997
<PERIOD-START> APR-27-1996
<PERIOD-END> JAN-24-1997
<EXCHANGE-RATE> 1
<CASH> 8,144
<SECURITIES> 0
<RECEIVABLES> 16,918
<ALLOWANCES> 0
<INVENTORY> 23,907
<CURRENT-ASSETS> 58,630
<PP&E> 676,966
<DEPRECIATION> 209,269
<TOTAL-ASSETS> 556,039
<CURRENT-LIABILITIES> 127,190
<BONDS> 0
0
60
<COMMON> 426
<OTHER-SE> 418,028
<TOTAL-LIABILITY-AND-EQUITY> 556,039
<SALES> 618,493
<TOTAL-REVENUES> 618,582
<CGS> 200,574
<TOTAL-COSTS> 501,246
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 41,745
<INCOME-TAX> 15,356
<INCOME-CONTINUING> 26,389
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,389
<EPS-PRIMARY> 0.63
<EPS-DILUTED> 0.63
</TABLE>
