<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 October 27, 2000
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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
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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 (I.R.S. Employer
incorporation 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, of which 34,792,562 were outstanding.
<PAGE> 2
BOB EVANS FARMS, INC.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Dollars in thousands)
Oct. 27, 2000 April 28, 2000
------------- --------------
Unaudited Audited
--------- -------
<S> <C> <C>
ASSETS
Current assets
Cash and equivalents $ 5,000 $ 6,780
Accounts receivable 15,295 13,651
Inventories 16,823 16,456
Deferred income taxes 7,665 7,665
Prepaid expenses 2,132 1,694
--------- ---------
TOTAL CURRENT ASSETS 46,915 46,246
Property, plant and equipment 866,640 825,541
Less accumulated depreciation 290,876 278,947
--------- ---------
NET PROPERTY, PLANT AND EQUIPMENT 575,764 546,594
Other assets
Deposits and other 1,715 1,388
Long-term investments 11,636 11,400
Deferred income taxes 10,654 10,654
Cost in excess of net assets acquired 7,593 7,849
Other intangible assets 233 310
--------- ---------
TOTAL OTHER ASSETS 31,831 31,601
--------- ---------
$ 654,510 $ 624,441
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Line of credit $ 102,140 $ 99,295
Accounts payable 12,037 9,085
Dividends payable 3,144 3,191
Federal and state income taxes 18,725 5,050
Accrued wages and related liabilities 14,197 14,851
Other accrued expenses 44,600 44,249
--------- ---------
TOTAL CURRENT LIABILITIES 194,843 175,721
Long-term liabilities
Deferred compensation 5,200 4,616
Deferred income taxes 14,883 14,883
Notes payable (net of discount of $14 at
Oct. 27, 2000, and $34 at April 28, 2000) 451 431
--------- ---------
TOTAL LONG-TERM LIABILITIES 20,534 19,930
Stockholders' equity
Common stock, $.01 par value; authorized 100,000,000
shares; issued 42,638,118 shares at Oct. 27, 2000,
and April 28, 2000 426 426
Preferred stock, authorized 1,200 shares; issued 120
shares at Oct. 27, 2000, and April 28, 2000 60 60
Capital in excess of par value 150,130 150,225
Retained earnings 427,412 406,280
Treasury stock, 7,845,556 shares at Oct. 27, 2000,
and 7,180,340 shares at April 28, 2000, at cost (138,895) (128,201)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 439,133 428,790
--------- ---------
$ 654,510 $ 624,441
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE> 3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
---------
<TABLE>
<CAPTION>
(Dollars in thousands, except per share amounts)
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
OCT. 27, OCT. 29, OCT. 27, OCT. 29,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET SALES $ 261,316 $ 245,599 $ 516,917 $ 489,356
Cost of sales 75,015 68,787 148,661 137,833
Operating wage and fringe benefit expenses 87,435 80,868 174,134 161,192
Other operating expenses 37,997 35,358 74,419 70,384
Selling, general and administrative expenses 28,302 28,808 55,247 55,415
Depreciation and amortization expense 9,754 8,913 19,478 17,687
--------- --------- --------- ---------
OPERATING INCOME 22,813 22,865 44,978 46,845
Net interest expense (1,075) (40) (2,426) (20)
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 21,738 22,825 42,552 46,825
PROVISIONS FOR INCOME TAXES
Federal 6,565 6,893 12,851 14,141
State 1,152 1,552 2,255 3,184
--------- --------- --------- ---------
7,717 8,445 15,106 17,325
--------- --------- --------- ---------
NET INCOME $ 14,021 $ 14,380 $ 27,446 $ 29,500
========= ========= ========= =========
EARNINGS PER SHARE - BASIC $ 0.40 $ 0.37 $ 0.78 $ 0.75
========= ========= ========= =========
EARNINGS PER SHARE - DILUTED $ 0.40 $ 0.37 $ 0.78 $ 0.74
========= ========= ========= =========
CASH DIVIDENDS PER SHARE $ 0.09 $ 0.09 $ 0.18 $ 0.18
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements
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<PAGE> 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
---------
<TABLE>
<CAPTION>
(Dollars in thousands)
SIX MONTHS ENDED
----------------
OCT. 27, OCT. 29,
2000 1999
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<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 27,446 $ 29,500
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 19,478 17,687
Gain on sale of property and equipment (7) (96)
Deferred compensation 402 1,061
Compensation expense attributable to stock plans 638 484
Cash provided by (used for) current assets
and current liabilities:
Accounts receivable (1,644) 2,670
Inventories (367) (1,927)
Prepaid expenses (438) (1,047)
Accounts payable 2,952 1,694
Federal and state income taxes 13,675 2,790
Accrued wages and related liabilities (654) (3,514)
Other accrued expenses (105) (5,293)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 61,376 44,009
INVESTING ACTIVITIES:
Purchase of property, plant and equipment (50,664) (43,409)
Purchase of long-term investments (452) (1,945)
Proceeds from sale of property, plant and equipment 2,571 4,695
Other (306) 1,042
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (48,851) (39,617)
FINANCING ACTIVITIES:
Cash dividends paid (6,361) (7,181)
Line of credit 2,845 25,105
Purchase of treasury stock (11,219) (39,106)
Proceeds from issuance of treasury stock 430 988
-------- --------
NET CASH USED IN FINANCING ACTIVITIES (14,305) (20,194)
-------- --------
Decrease in cash and equivalents (1,780) (15,802)
Cash and equivalents at the beginning of the period 6,780 25,455
-------- --------
Cash and equivalents at the end of the period $ 5,000 $ 9,653
======== ========
</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 adjustments) 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, 2000
(refer to Form 10-K for a summary of significant accounting policies
followed in the preparation of the consolidated financial statements).
2. EARNINGS PER SHARE
Basic earnings per share computations are based on the weighted-average
number of shares of common stock outstanding during the period presented.
Diluted earnings per share calculations reflect the assumed exercise and
conversion of employee stock options.
The numerator in calculating both basic and diluted earnings per share for
each period is reported net income. The denominator is based on the
following weighted-average number of common shares outstanding:
<TABLE>
<CAPTION>
(in thousands)
THREE MONTHS ENDED SIX MONTHS ENDED
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Oct. 27, 2000 Oct. 29, 1999 Oct. 27, 2000 Oct. 29, 1999
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic 35,026 39,009 35,196 39,468
Effect of dilutive
stock options 292 204 176 211
------ ------ ------ ------
Diluted 35,318 39,213 35,372 39,679
====== ====== ====== ======
</TABLE>
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<PAGE> 6
3. INDUSTRY SEGMENTS
The company's operations include restaurant operations and the processing
and sale of food and related products. The revenues from these segments
include both sales to unaffiliated customers and intersegment sales, which
are accounted for on a basis consistent with sales to unaffiliated
customers. Intersegment sales and other intersegment transactions have
been eliminated in the consolidated financial statements. Information on
the company's operating segments is summarized as follows:
<TABLE>
<CAPTION>
(in thousands)
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
Oct. 27, 2000 Oct. 29, 1999 Oct. 27, 2000 Oct. 29, 1999
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales
Restaurant Operations $206,529 $192,576 $411,866 $386,359
Food Products 62,513 60,148 120,655 117,350
-------- -------- -------- --------
269,042 252,724 532,521 503,709
Intersegment sales of food products (7,726) (7,125) (15,604) (14,353)
-------- -------- -------- --------
Total $261,316 $245,599 $516,917 $489,356
======== ======== ======== ========
Operating Income
Restaurant Operations $ 19,102 $ 18,514 $ 39,731 $ 38,433
Food Products 3,711 4,351 5,247 8,412
-------- -------- -------- --------
Total $ 22,813 $ 22,865 $ 44,978 $ 46,845
======== ======== ======== ========
</TABLE>
4. RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform to the
current classification.
5. NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities, in 1998, SFAS No. 137, Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective
Date of FASB Statement No. 133, in 1999 and SFAS No. 138, Accounting for
Certain Derivative Instruments and Certain Hedging Activities- An
Amendment of SFAS No. 133, in 2000. The statements require that all
derivatives be recorded as either assets or liabilities in the balance
sheet and be measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for
depending on the use of the derivative and whether it qualifies for hedge
accounting. The company has assessed the impact of these statements on the
company's consolidated financial statements and currently anticipates that
they will have an insignificant impact. The company plans to adopt the
statements in the first quarter of fiscal 2002.
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<PAGE> 7
In December 1999, the SEC staff released Staff Accounting Bulletin (SAB)
No. 101, which provides guidance on the recognition, presentation, and
disclosure of revenue in financial statements. The company has examined
the guidance provided in SAB No. 101 and has determined that it does not
require a change to the company's existing revenue recognition practices.
On March 31, 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, Accounting for Certain Transactions Involving Stock
Compensation, an interpretation of APB Opinion No. 25. The interpretation
clarifies guidance for certain issues that arose in the application of APB
Opinion No. 25, Accounting for Stock Issued to Employees. The company has
assessed the impact of this interpretation on the company's consolidated
financial statements and has determined that it will not have an impact at
the present time.
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<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SALES
Consolidated net sales increased $15.7 million, or 6.4%, for the second
quarter ended October 27, 2000, compared to the corresponding quarter a year
ago. The increase was the result of a $13.9 million increase in restaurant
segment sales and a $1.8 million increase in food products segment sales.
Restaurant segment sales accounted for approximately 79% of total sales in the
second quarter of fiscal 2001. For the six-month period ended October 27, 2000,
consolidated net sales increased $27.6 million, or 5.6%, compared to the
previous year.
The restaurant sales increase of $13.9 million in the second quarter, a
7.2% increase over the same quarter a year ago, was primarily the result of a
3.0% increase in same-store sales as well as more restaurants in operation. The
same-store sales increase, inclusive of an average menu price increase of 3.7%,
reflects the continued trend of quarterly same-store sales gains for four years
running. Additional sales growth was provided by an increase in the number of
operating locations: 447 restaurants in operation at the end of the second
quarter this year versus 429 a year earlier.
The chart below summarizes the restaurant openings and closings during the
last six quarters:
Beginning Opened Closed Ending
-----------------------------------------------------------------------
Fiscal 2001
1st quarter 441 3 1 443
2nd quarter 443 5 1 447
Fiscal 2000
1st quarter 424 1 1 424
2nd quarter 424 7 2 429
3rd quarter 429 8 6 431
4th quarter 431 10 0 441
The company expects to open approximately 22 additional stores in the last
half of fiscal 2001. For the six-month period ended October 27, 2000, the
restaurant segment's sales increased $25.5 million or 6.6%.
The food products segment sales increased $1.8 million, or 3.3%, for the
second quarter and $2.1 million, or 2.0%, through six months compared to the
corresponding periods a year ago. The increase reflects additional sales
provided by new products and higher sales prices offset by a 3% decrease in
comparable pounds of sausage products sold for both periods. The average
benchmark retail price for a one-pound roll of sausage for the second quarter
was $3.19 compared to $2.99 for the same period last year.
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<PAGE> 9
COST OF SALES
Consolidated cost of sales (cost of materials) was 28.7% of sales in the
second quarter of fiscal 2001 compared to 28.0% of sales in the second quarter
of fiscal 2000. Year-to-date, consolidated cost of sales represented 28.8% of
sales versus 28.2% last fiscal year.
In the restaurant segment, food cost (cost of sales) was more favorable at
25.2% of sales in the second quarter and 25.1% of sales year-to-date, versus
25.5% and 25.6%, respectively, in the corresponding periods last year.
In the food products segment, cost of sales increased to 42.0% of sales
for the quarter and 43.0% year-to-date compared to 37.1% and 37.9%,
respectively, for the corresponding periods a year ago. This increase was mainly
due to hog costs averaging $39.63 per hundredweight for the second quarter of
fiscal 2001 versus $29.28 in the same period last year, a 35.3% increase. This
follows a 31.0% increase in hog costs in the first quarter.
OPERATING WAGE AND FRINGE BENEFIT EXPENSES
Consolidated operating wage and fringe benefit expenses increased to 33.5%
of sales for the quarter and 33.7% year-to-date compared to 32.9% of sales for
both of the corresponding periods a year ago. In the restaurant segment,
operating wage and fringe benefit expenses represented 39.4% of sales for the
quarter and 39.2% of sales year-to-date versus 38.6% and 38.4%, respectively,
for the corresponding periods a year ago. In the food products segment,
operating wage and fringe benefit expenses represented 11.3% of sales for the
quarter and 12.0% of sales year-to-date versus 12.4% and 12.6%, respectively, of
sales for the corresponding periods a year ago. Higher management and hourly
wage expense contributed to the increase in the restaurants' ratios. Lower
production volume resulted in decreased hourly wages in the food products
segment.
OTHER OPERATING EXPENSES
Over 90% of other operating expenses occurred in the restaurant segment;
the most significant components of which were advertising, utilities, restaurant
supplies, repair and maintenance, taxes (other than income taxes) and credit
card processing fees. Consolidated other operating expenses represented 14.5% of
sales for the quarter and 14.4% of sales year-to-date for fiscal 2001 versus
14.4% for both the quarter and year-to-date periods a year ago. There were no
significant differences in any of the components of other operating expenses.
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<PAGE> 10
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Consolidated selling, general and administrative expenses represented
10.8% of sales for the quarter and 10.7% of sales year-to-date in comparison to
11.7% and 11.3%, respectively, in the corresponding periods a year ago. The most
significant components of selling, general and administrative expenses were
wages and fringe benefits and food products segment promotional and advertising
expenses. The decrease as a percentage of sales was due mostly to less
promotional expenses for food products.
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 were also used for liquidity
needs, capital expansion and purchases of treasury shares at various times. The
total bank lines of credit available is $150.0 million, of which $102.1 million
was outstanding at October 27, 2000.
The company believes that the funds needed for capital expenditures,
working capital and treasury share purchases during the remainder of fiscal 2001
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 warranted.
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 fiscal 2001 and beyond to differ materially from those expressed in such
forward-looking statements. These important factors include, without limitation,
changes in 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> 11
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders of the Company (the "Annual Meeting")
was held on September 11, 2000. At the Annual Meeting, 35,301,495 common
shares were outstanding and entitled to vote and 29,394,234,or 83.3%, of
the outstanding common shares entitled to vote were represented in person
or by proxy.
(b) Directors elected at the Annual Meeting:
Stewart K. Owens
Larry C. Corbin
Robert E.H. Rabold
Directors whose term of office continued after the Annual Meeting:
Daniel A. Fronk Daniel E. Evans
Cheryl L. Krueger-Horn Michael J. Gasser
G. Robert Lucas E.W. (Bill) Ingram III
(c) Matters voted upon at the Annual Meeting:
FOR WITHHELD
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1) Election of Stewart K. Owens 22,263,440 7,130,794
2) Election of Larry C. Corbin 26,163,573 3,230,661
3) Election of Robert E.H. Rabold 26,231,926 3,162,308
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
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<S> <C> <C> <C>
4) Stockholder proposal to arrange
for the sale of the company 3,203,085 23,011,687 479,042
5) Stockholder proposal to eliminate
stock options, bonuses and
restricted stock for top
executives 4,312,097 21,833,156 548,555
6) Stockholder proposal to declassify
the company's board of directors 11,102,310 14,939,304 652,196
</TABLE>
(d) Not applicable
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<PAGE> 12
ITEM 5. OTHER INFORMATION
As discussed in the company's Proxy Statement for the 2000 Annual Meeting
of Stockholders, any qualified stockholder of the company who intends to submit
a proposal at the 2001 Annual Meeting of Stockholders (the "2001 Annual
Meeting") must submit such proposal to the company not later than April 10, 2001
to be considered for inclusion in the company's Proxy Statement and form of
Proxy (the "Proxy Materials") relating to that meeting. If a stockholder intends
to present a proposal at the 2001 Annual Meeting of Stockholders, but has not
sought the inclusion of such proposal in the company's Proxy Materials, such
proposal must be received by the company prior to June 26, 2001 or the company's
management proxies for the 2001 Annual Meeting will be entitled to use their
discretionary voting authority should such proposal then be raised, without any
discussion of the matter in the company's Proxy Materials.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10. Bob Evans Farms, Inc. Voluntary Employees' Beneficiary
Association And Trust Agreement
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/ Stewart K. Owens
--------------------------------------
Stewart K. Owens
President and Chief Executive Officer
/s/ Donald J. Radkoski
--------------------------------------
Donald J. Radkoski
Group Vice President and Treasurer
(Chief Financial Officer)
DECEMBER 1, 2000
--------------------------
Date
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