<PAGE> 1
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 25, 1997
---------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
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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
- --------------------------------------------- -------------------
(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
<TABLE>
<CAPTION>
(Dollars in Thousands)
July 25, 1997 April 25, 1997
------------- --------------
Unaudited Audited
--------- -------
<S> <C> <C>
ASSETS
- ------
Current Assets
Cash and equivalents $ 21,095 $ 12,283
Trade accounts receivable 17,305 16,394
Inventory 21,033 23,600
Federal and state income taxes 0 635
Deferred income taxes 6,182 6,182
Prepaid expenses 2,897 2,329
-------- --------
TOTAL CURRENT ASSETS 68,512 61,423
Property, Plant, and Equipment 699,455 687,705
Less accumulated depreciation 222,151 214,684
-------- --------
NET PROPERTY, PLANT AND EQUIPMENT 477,304 473,021
Other Assets
Deposits and other 3,017 3,403
Long-term investments 5,141 5,101
Deferred income taxes 10,080 10,080
Cost in excess of net assets acquired 9,803 9,938
Other intangible assets 1,034 1,113
-------- --------
TOTAL OTHER ASSETS 29,075 29,635
-------- --------
$574,891 $564,079
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities
Line of credit $ 69,150 $ 68,880
Accounts payable 7,337 7,119
Dividends payable 3,326 3,327
Federal and state income taxes 4,364 0
Accrued wages and related liabilities 9,733 13,438
Other accrued expenses 38,899 36,085
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TOTAL CURRENT LIABILITIES 132,809 128,849
Long-Term Liabilities
Deferred income taxes 10,836 10,836
Notes payable (net of discount of $273,000 at
July 25, 1997 and $303,000 at April 25, 1997) 1,617 1,587
-------- --------
TOTAL LONG-TERM LIABILITIES 12,453 12,423
Stockholders' Equity
Common stock, $.01 par value; authorized 100,000,000
shares; issued 42,638,118 shares at July 25, 1997
and April 25, 1997 426 426
Preferred stock: authorized 1,200 shares; issued 120
shares at July 25, 1997 and April 25, 1997 60 60
Capital in excess of par value 145,847 145,889
Retained earnings 298,394 291,364
-------- --------
444,727 437,739
Less treasury stock: 1,058,577 shares at July 25, 1997
and 1,054,949 shares at April 25, 1997, at cost 15,098 14,932
-------- --------
TOTAL STOCKHOLDERS' EQUITY 429,629 422,807
-------- --------
$574,891 $564,079
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
---------
<TABLE>
<CAPTION>
(Dollars in Thousands Except Net Income
Per Share and Cash Dividend Amounts)
Thirteen Weeks Ended
--------------------
July 25, 1997 July 26, 1996
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<S> <C> <C>
Net Sales $ 222,045 $ 213,060
Cost of sales 71,092 67,973
Operating wage and fringe benefit expenses 69,426 67,579
Other operating expenses 30,467 29,723
Selling, general and administrative expenses 26,531 26,838
Depreciation expense 7,467 6,771
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OPERATING PROFIT 17,062 14,176
Net interest (589) 66
----------- -----------
INCOME BEFORE INCOME TAXES 16,473 14,242
Provisions for income taxes
Federal 4,991 4,372
State 1,121 969
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6,112 5,341
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NET INCOME $ 10,361 $ 8,901
=========== ===========
Weighted average number of common 41,589,540 42,273,714
=========== ===========
shares outstanding
Net income per common share based upon
the weighted average number of
common shares outstanding $.25 $.21
=========== ===========
Cash dividend per common share $.08 $.08
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE> 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
---------
<TABLE>
<CAPTION>
(Dollars in Thousands)
Thirteen Weeks Ended
--------------------
July 25, 1997 July 26, 1996
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 10,361 $ 8,901
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 7,681 6,984
Loss (gain) on sale of property and equipment 0 99
Compensation expense attributable to stock plans 67 30
Cash provided by (used for) current assets
and current liabilities:
Accounts receivable (911) (2,955)
Inventories 2,567 (581)
Prepaid expenses (568) (1,116)
Accounts payable 218 1,555
Federal and state income taxes 4,999 3,705
Accrued wages and related liabilities (3,772) (4,637)
Other accrued expenses 2,814 3,531
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NET CASH PROVIDED BY OPERATING ACTIVITIES 23,456 15,516
INVESTING ACTIVITIES:
Purchase of property, plant and equipment (11,750) (11,747)
Purchase of investments (40) (172)
Proceeds from sale of property, plant and equipment 0 43
Other 386 382
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NET CASH USED IN INVESTING ACTIVITIES (11,404) (11,494)
FINANCING ACTIVITIES:
Cash dividends paid (3,332) (3,387)
Draws on line of credit 270 8,400
Purchase of treasury stock (414) (1,827)
Interest accrued on long-term notes 30 36
Distribution of treasury stock
due to the exercise of stock
options and employee bonuses 206 530
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NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (3,240) 3,752
-------- --------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS 8,812 7,774
CASH AND EQUIVALENTS AT THE BEGINNING OF THE PERIOD 12,283 14,369
-------- --------
CASH AND EQUIVALENTS AT THE END OF THE PERIOD $ 21,095 $ 22,143
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE> 5
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
25, 1997 (refer to Form 10-K for a summary of significant accounting
policies followed in the preparation of the consolidated financial
statements).
2. Pending Accounting Changes
--------------------------
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share," which simplifies the
calculation of earnings per share (EPS) and makes it comparable to
international EPS standards. The company will adopt Statement 128 in
the third quarter of fiscal 1998 and, based on current circumstances,
does not believe the effect of adoption will be material.
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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. and subsidiaries (the
company) increased $9.0 million, or 4.2%, for the first quarter ended July 25,
1997, compared to the corresponding quarter a year ago. The increase was
comprised of a $7.1 million increase in the restaurant segment and a $1.9
million increase in the food products segment. Restaurant segment sales
accounted for 73.5% and 73.3% of total sales in the first quarters of fiscal
1998 and 1997, respectively.
The restaurant segment sales increase of $7.1 million (4.5%) in the
first quarter was due to an increase in same-store sales of 3.3% as well as more
restaurants in operation. The same-store sales increase, inclusive of an average
menu price increase of 2.8%, represented the third consecutive quarter of
same-store sales gains. Excluding the Cantina del Rio Mexican concept which the
company closed in August 1996, restaurant sales increased 8.4% in the first
quarter. At the end of the first quarter, the company had 397 restaurants in
operation compared to 390 a year ago. During the first quarter, the company
opened four new restaurants and closed one existing restaurant. The chart below
summarizes the openings and closings during the last five quarters:
SUMMARY OF RESTAURANTS OPENED AND CLOSED
<TABLE>
<CAPTION>
Beginning Opened Closed Ending
--------- ------ ------ ------
<S> <C> <C> <C> <C>
Fiscal 1998
1st quarter 394 4 1 397
Fiscal 1997
1st quarter 390 5 5 390
2nd quarter 390 7 14 383
3rd quarter 383 4 0 387
4th quarter 387 7 0 394
</TABLE>
The food product segment sales increase of $1.9 million (3.4%) was the
result of increases in prices the company charges for its sausage products. The
price increases were intended to help offset the impact of
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<PAGE> 7
exceptionally high hog costs (discussed in the cost of sales section below). The
benchmark retail price for a one-pound roll of sausage averaged $2.99 in the
first quarter of fiscal 1997 compared to $3.09 in the first quarter of fiscal
1998. The company believes that these higher retail prices were a factor in
reducing the volume of sausage products sold -- comparable pounds of sausage
products sold were down 2% compared to the first quarter of fiscal 1997. Sales
of other products in the food products segment were mostly unchanged from a year
ago.
COST OF SALES
Consolidated cost of sales (cost of materials) was 32.0% of sales in
the first quarter of fiscal 1998 compared to 31.9% of sales in the first quarter
of fiscal 1997. Restaurant segment cost of sales (food cost) was 26.1% for the
first quarter compared to 26.6% for the same period a year ago. The improvement
in food cost was reflective of the impact of menu price increases as well as
various changes in product mix. Food products segment cost of sales increased to
48.6% of sales in this year's first quarter from 46.5% of sales the
corresponding period a year ago. This increase was due to significant increases
in hog costs, which averaged $50.91 per hundredweight for the first three months
of fiscal 1998 versus $46.90 per hundredweight in the same period last year, an
8.6% increase. The company raised its sausage prices to help absorb the
increased hog costs, but has limited price increases in order to preserve market
share.
OPERATING WAGE AND FRINGE BENEFIT EXPENSES
Consolidated operating wage and fringe benefit expenses represented
31.3% and 31.7% of sales in the first quarters of fiscal 1998 and 1997,
respectively. In the restaurant segment, operating wage and fringe benefit
expenses represented 38.1% of sales for the first three months of fiscal 1998
compared to 38.6% for the same period a year ago. The improvement was due mostly
to the closing of the Cantina del Rio restaurants, which had much higher wage
costs than the company's other restaurants. Additional benefit was provided by
lower health insurance costs. In the food products segment, operating wage and
fringe benefit expenses were 12.4% of sales versus 12.8% for the corresponding
quarter a year ago. The improvement in this
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<PAGE> 8
ratio was due to the fact that the increased food products sales were primarily
the result of sausage price increases rather than increased production.
OTHER OPERATING EXPENSES
Approximately 90% of other operating expenses occurred in the
restaurant segment; the most significant components of which were advertising,
utilities, restaurant supplies, repair and maintenance, general liability
insurance and taxes (other than income taxes). Consolidated other operating
expenses for the first three months of fiscal 1998, as a percentage of sales,
were 13.7% compared to 14.0% for the same period a year ago. The improvement was
the result of the closing of the Cantina del Rio restaurants, which had higher
operating expenses than the company's other restaurants. Some additional benefit
was provided by reduced advertising expense.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
As a percentage of sales, consolidated selling, general and
administrative expenses were 11.9% and 12.6% in the first quarters of 1998 and
1997, respectively. The most significant components of selling, general and
administrative expenses were wages, fringe benefits and food products segment
promotional expenses. The improvement was primarily the result of lower
promotional expenses associated with charcoal products.
NET INCOME
Consolidated net income increased $1.5 million, or 16.4%, in the first
quarter of fiscal 1998 compared to the same period a year ago. Approximately
one-third of the improvement was attributable to the closing in August 1996 of
the Cantina del Rio restaurants, which lost $0.9 million before taxes in the
first quarter of fiscal 1997. The remaining increase was the result of higher
margins in the restaurant segment brought about by the increase in same-store
sales and lower food cost, in addition to the profit provided by new restaurants
in operation.
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<PAGE> 9
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
$120.0 million, of which $69.2 million was outstanding at July 25, 1997.
The company believes that the funds needed for capital expenditures and
working capital during the remainder of fiscal 1998 will be generated both
internally and from available bank lines of credit. Longer-term financing
alternatives will continue to be evaluated by the company as conditions warrant.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The statements contained in this report which are not historical fact are
"forward-looking statements" that involve various important assumptions, risks,
uncertainties and other factors which could cause the company's actual results
for 1998 and beyond to differ materially from those expressed in such
forward-looking statements. These important factors include, without limitation,
continuing high hog costs and the possibility of severe weather conditions where
the company operates its restaurants, as well as other risks previously
disclosed in the company's securities filings and press releases.
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<PAGE> 10
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
/s/ Daniel E. Evans
------------------------------------
Daniel E. Evans
Chairman of the Board
(Chief Executive Officer)
/s/ Donald J. Radkoski
------------------------------------
Donald J. Radkoski
Group Vice President and Treasurer
(Chief Financial Officer)
September 5, 1997
---------------------
Date
-10-
<TABLE> <S> <C>
<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 25, 1997.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-24-1998
<PERIOD-START> APR-26-1997
<PERIOD-END> JUL-25-1997
<EXCHANGE-RATE> 1
<CASH> 21,095
<SECURITIES> 0
<RECEIVABLES> 17,305
<ALLOWANCES> 0
<INVENTORY> 21,033
<CURRENT-ASSETS> 68,512
<PP&E> 699,455
<DEPRECIATION> 222,151
<TOTAL-ASSETS> 574,891
<CURRENT-LIABILITIES> 132,809
<BONDS> 0
0
60
<COMMON> 426
<OTHER-SE> 429,143
<TOTAL-LIABILITY-AND-EQUITY> 574,891
<SALES> 222,045
<TOTAL-REVENUES> 222,045
<CGS> 71,092
<TOTAL-COSTS> 178,452
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 589
<INCOME-PRETAX> 16,473
<INCOME-TAX> 6,112
<INCOME-CONTINUING> 10,361
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,361
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0.25
</TABLE>
