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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 28, 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 (I.R.S. Employer
of 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 35,180,503 were outstanding.
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<TABLE>
BOB EVANS FARMS, INC.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
(Dollars in thousands)
July 28, 2000 April 28, 2000
------------- --------------
Unaudited Audited
--------- -------
ASSETS
<S> <C> <C>
Current assets
Cash and equivalents $ 3,268 $ 6,780
Accounts receivable 14,290 13,651
Inventories 15,652 16,456
Deferred income taxes 7,665 7,665
Prepaid expenses 2,231 1,694
--------- ---------
TOTAL CURRENT ASSETS 43,106 46,246
Property, plant and equipment 844,363 825,541
Less accumulated depreciation 285,279 278,947
--------- ---------
NET PROPERTY, PLANT AND EQUIPMENT 559,084 546,594
Other assets
Deposits and other 1,510 1,388
Long-term investments 11,602 11,400
Deferred income taxes 10,654 10,654
Cost in excess of net assets acquired 7,721 7,849
Other intangible assets 271 310
========= =========
TOTAL OTHER ASSETS 31,758 31,601
--------- ---------
$ 633,948 $ 624,441
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities
Line of credit $ 96,780 $ 99,295
Accounts payable 11,562 9,085
Dividends payable 3,166 3,191
Federal and state income taxes 11,377 5,050
Accrued wages and related liabilities 11,781 14,851
Other accrued expenses 43,914 44,249
========= =========
TOTAL CURRENT LIABILITIES 178,580 175,721
Long-term liabilities
Deferred compensation 5,197 4,616
Deferred income taxes 14,883 14,883
Notes payable (net of discount of $24 at
July 28, 2000, and $34 at April 28, 2000) 441 431
--------- ---------
TOTAL LONG-TERM LIABILITIES 20,521 19,930
Stockholders' equity
Common stock, $.01 par value;
authorized 100,000,000 shares; issued
42,638,118 shares at July 28, 2000,
and April 28, 2000 426 426
Preferred stock, authorized 1,200 shares;
issued 120 shares at July 28, 2000,
and April 28, 2000 60 60
Capital in excess of par value 150,179 150,225
Retained earnings 416,538 406,280
Treasury stock, 7,457,615 shares at July 28, 2000,
and 7,180,340 shares at April 28, 2000, at cost (132,356) (128,201)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 434,847 428,790
--------- ---------
$ 633,948 $ 624,441
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
---------
<CAPTION>
(Dollars in thousands, except per share amounts)
Three Months Ended
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July 28, 2000 July 30, 1999
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<S> <C> <C>
NET SALES $255,601 $243,757
Cost of sales 73,646 69,046
Operating wage and fringe benefit expenses 86,699 80,324
Other operating expenses 36,422 35,026
Selling, general and administrative expenses 26,945 26,607
Depreciation and amortization expense 9,724 8,774
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OPERATING INCOME 22,165 23,980
Net interest income (expense) (1,351) 20
-------- --------
INCOME BEFORE INCOME TAXES 20,814 24,000
PROVISIONS FOR INCOME TAXES
Federal 6,286 7,248
State 1,103 1,632
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7,389 8,880
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NET INCOME $ 13,425 $ 15,120
======== ========
EARNINGS PER SHARE - BASIC $ 0.38 $ 0.38
======== ========
EARNINGS PER SHARE - DILUTED $ 0.38 $ 0.38
======== ========
CASH DIVIDENDS PER SHARE $ 0.09 $ 0.09
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements
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<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
---------
<CAPTION>
(Dollars in thousands)
Three Months Ended
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July 28, 2000 July 30, 1999
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<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 13,425 $ 15,120
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 9,724 8,774
Loss (gain) on sale of assets 3 (93)
Deferred compensation 503 722
Compensation expense attributable to stock plans 304 229
Cash provided by (used for) current assets
and current liabilities:
Accounts receivable (639) 3,254
Inventories 804 (226)
Prepaid expenses (537) (1,114)
Accounts payable 2,477 235
Federal and state income taxes 6,327 4,921
Accrued wages and related liabilities (3,070) (5,798)
Other accrued expenses (561) (4,065)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 28,760 21,959
INVESTING ACTIVITIES:
Purchase of property, plant and equipment (22,346) (18,889)
Purchase of long-term investments (310) (1,644)
Proceeds from sale of property, plant and equipment 403 628
Other (111) 652
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NET CASH USED IN INVESTING ACTIVITIES (22,364) (19,253)
FINANCING ACTIVITIES:
Cash dividends paid (3,192) (3,627)
Line of credit (2,515) 11,100
Purchase of treasury stock (4,319) (18,635)
Proceeds from issuance of treasury stock 118 522
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NET CASH USED IN FINANCING ACTIVITIES (9,908) (10,640)
-------- --------
Decrease in cash and equivalents (3,512) (7,934)
Cash and equivalents at the beginning of the period 6,780 25,455
-------- --------
Cash and equivalents at the end of the period $ 3,268 $ 17,521
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
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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, 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
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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>
(in thousands)
Three Months Ended
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July 28, 2000 July 30, 1999
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<CAPTION>
<S> <C> <C>
Basic 35,367 39,926
Effect of dilutive
stock options 93 221
------ ------
Diluted 35,460 40,147
====== ======
</TABLE>
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3. Industry Segments
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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>
(in thousands)
Three Months Ended
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July 28, 2000 July 30, 1999
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<S> <C> <C>
Sales
Restaurant Operations $205,337 $193,783
Food Products 58,142 57,202
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263,479 250,985
Intersegment sales of food products (7,878) (7,228)
-------- --------
Total $255,601 $243,757
======== ========
Operating Income
Restaurant Operations $ 20,629 $ 19,919
Food Products 1,536 4,061
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Total $ 22,165 $ 23,980
======== ========
</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 and SFAS No.
137, Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133, in 1999. 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 is currently
assessing the impact of these statements on the company's consolidated
financial statements. The company plans to adopt the statements in the
first quarter of fiscal 2002.
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 result in a change to the company's
existing revenue recognition practices.
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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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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SALES
Consolidated net sales increased $11.8 million, or 4.9%, for the first
quarter ended July 28, 2000, compared to the corresponding quarter a year ago.
The increase was the result of an $11.5 million increase in restaurant segment
sales and a $0.3 million increase in food products segment sales. Restaurant
segment sales accounted for approximately 80% of total sales in the first
quarter of fiscal 2001.
The increase of $11.5 million additional restaurant sales in the first
quarter, a 6.0% increase over the same quarter a year ago, were primarily the
result of a 2.4% 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 3.5%, reflects the continued trend of quarterly same-store sales
gains for over three years. Additional sales growth was provided by an increase
in the number of operating locations: 443 restaurants in operation at the end of
the first quarter this year versus 424 a year earlier.
The chart below summarizes the restaurant openings and closings during
the last five quarters:
<TABLE>
<CAPTION>
Beginning Opened Closed Ending
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<S> <C> <C> <C> <C>
Fiscal 2001
1st quarter 441 3 1 443
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
</TABLE>
The company expects to open approximately 30 stores in fiscal 2001,
mostly in the second half of the year.
Food Products segment sales were relatively flat in the first quarter
compared to the corresponding quarter a year ago. A 4% decrease in comparable
pounds of sausage products sold nearly offset additional sales provided by new
products and higher sales prices. The average benchmark retail price for a
one-pound roll of sausage for the first quarter was $3.19 compared to $2.99 for
the same period last year.
COST OF SALES
Consolidated cost of sales (cost of materials) was 28.8% of sales in
the first quarter of fiscal 2001 compared to 28.3% of sales in the first quarter
of fiscal 2000. Restaurant segment cost of sales (food cost) was more favorable
at 25.1% of sales for the first quarter
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compared to 25.7% of sales for the same period a year ago. Food products segment
cost of sales increased to 44.1% versus 38.7% of sales in the first quarter this
year versus the corresponding period last year. This increase was mainly due to
hog costs averaging $42.71 per hundredweight for the first three months of
fiscal 2001 versus $32.60 per hundredweight in the same period last year, a
31.0% increase.
OPERATING WAGE AND FRINGE BENEFIT EXPENSES
Consolidated operating wage and fringe benefit expenses were 33.9% of
sales for the first quarter of fiscal 2001 compared to 33.0% of sales in the
first quarter of fiscal 2000. In the restaurant segment, operating wage and
fringe benefit expenses represented 39.1% of sales for the first three months of
fiscal 2001 compared to 38.1% for the same period a year ago. In the food
products segment, operating wage and fringe benefit expenses were 12.7% of sales
versus 12.8% for the corresponding quarter a year ago. Higher management and
hourly wage expense contributed to the increase in the restaurant segment's
percentage.
OTHER OPERATING EXPENSES
Over 90% of other operating expenses occurred in the restaurant
segment in the first quarter this year; 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 for the first three months of fiscal 2001, as a percentage of
sales, were 14.2% compared to 14.4% in the same period a year ago. There were no
significant differences in any of the components of other operating expenses.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
As a percentage of sales, consolidated selling, general and
administrative expenses were 10.5% and 10.9% in the first quarters of fiscal
2001 and fiscal 2000, respectively. The most significant components of selling,
general and administrative expenses were wages, 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
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treasury shares at various times. The total bank lines of credit available is
$150.0 million, of which $96.8 million was outstanding at July 28, 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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PART II - OTHER INFORMATION
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
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.
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Registrant
/s/ Stewart K. Owens
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Stewart K. Owens
President and Chief Executive Officer
/s/ Donald J. Radkoski
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Donald J. Radkoski
Group Vice President and Treasurer
(Chief Financial Officer)
September 7, 2000
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Date
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