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Bob Evans Reports Fiscal 2014 Second-Quarter Results

NEW ALBANY, Ohio, Dec. 3, 2013 /PRNewswire/ --

Company announces 2Q 2014 earnings per diluted share of $0.23; non-GAAP diluted EPS was $0.35 for the quarter; net sales from continuing operations increased 1 percent

Higher than expected year-over-year increase in sow prices, and other short-term cost impacts reduced diluted GAAP and non-GAAP EPS by approximately $0.27 per diluted share.  Growth and transformation-related expenses impacted diluted EPS by an additional $0.05 per share

Company updates fiscal year 2014 non-GAAP EPS guidance to incorporate accretion from expected impact of share repurchases of approximately $0.09 to $0.11 per diluted share; guidance range set at $2.60 to $2.65

Bob Evans Restaurants completed 66 Farm Fresh Refresh remodels during 2Q 2014, 126 completed year-to-date; remodel program to be completed by the end of fiscal year 2014

BEF Foods' 2Q 2014 net sales increase 10.6%, driven primarily by sales mix; volume up 0.2% 

Company announces $50 million expansion of fiscal 2014 share repurchase program; program now totals $225 million for fiscal 2014

Company reaffirms long-term annual non-GAAP earnings growth guidance of 8 to 12 percent and 5-year non-GAAP net operating margin improvement guidance of 300 to 350 basis points

Bob Evans Farms, Inc. (NASDAQ: BOBE) today announced its financial results for the fiscal 2014 second quarter ended Friday, October 25, 2013.

Second-quarter fiscal 2014 commentary

Chairman and Chief Executive Officer Steve Davis said, "The confidence we have in our ability to successfully execute our growth strategies, and reap the benefits of our recent transformational growth investments in Bob Evans Restaurants and BEF Foods, is reflected in our announcement of an incremental $50 million for share repurchases.  This increase brings our expected share repurchase activity to $225 million for fiscal 2014, and our forecasted year-end fiscal 2014 leverage ratio to approximately three times adjusted debt to EBITDAR, our previously announced target.  We believe a three times leverage ratio is a prudent level of leverage that will allow us to invest in our businesses, return meaningful capital to shareholders, and maintain flexibility for acquisitions. 

"Furthermore, our updated fiscal 2014 non-GAAP earnings per share guidance range of $2.60 to $2.65 including the accretive effect of the share repurchase, reflects our confidence the Company's transformational investments will transition from generating net costs during the first half of the fiscal year, to generating net benefits during the second half of fiscal 2014.  The new workforce management initiative and accelerated Farm Fresh Refresh remodeling program at Bob Evans Restaurants, and the Lima, Ohio, and Sulphur Springs, Texas, plant expansion projects at BEF Foods, are fundamental to achieving our five-year 300 to 350 basis point operating margin improvement goal in each of our businesses by fiscal year 2018."

Davis continued, "At Bob Evans Restaurants, we completed 66 Farm Fresh Refresh restaurant remodels and opened our second Bob Evans Express location at our corporate headquarters.  Additionally, we restructured and strengthened the Bob Evans Restaurants marketing team to more effectively leverage the sales growth opportunities enabled by the Farm Fresh Refresh program and our new restaurant prototype design.  Finally, we opened a restaurant in Finneytown, Ohio, that embodies the important elements of the Farm Fresh Refresh remodeling program, while also incorporating new, more modern, design elements that will ultimately reduce building construction costs by an estimated 10 to 15 percent. 

"At BEF Foods, we completed major plant expansion projects at our Lima, Ohio, refrigerated side dish manufacturing facility, as well as at our ready-to-eat production facility located in Sulphur Springs, Texas.  We also announced the closure of our Richardson, Texas, fresh sausage production plant, reducing our fresh sausage plant network to two facilities with sufficient capacity to meet our anticipated volume needs.  The cumulative effect of the BEF Foods' plant closures, capacity additions, and other efficiency initiatives we have announced during the last two years is expected to add approximately 250 basis points to the segment's operating margin during fiscal 2015.  Unfortunately, we were also negatively affected by a $0.9 million profit impact due to lost sales, and increased costs associated with a supplier dispute related to BEF Foods' side dish business.  Despite the impacts of record high sow costs which negatively impacted the quarter by approximately $9 million on a year-over-year basis, growth and transformational investment-related expenses, and our supplier dispute, we remain committed to driving our growth strategies and achieving our long-term 8 to 12 percent average adjusted annual non-GAAP earnings growth guidance."

Second-quarter fiscal 2014 consolidated results and GAAP to non-GAAP reconciliation

The following commentary addresses comparisons to financial results as presented in fiscal year 2013 when Mimi's Cafe was a component of the Company's ongoing operations.  The Company believes this allows for enhanced understanding of the transition from fiscal year 2013 results to fiscal year 2014 results.  Mimi's Cafe operations have been classified as discontinued operations during fiscal year 2014, and will be reflected as such in the Company's second quarter Form 10-Q filing, with fiscal year 2013 financial statements recast to reflect the discontinued operations.

The second-quarter fiscal 2014 results include the negative operating profit impact of $5.5 million of costs, partially offset by $0.4 million of interest income, from the following GAAP to non-GAAP reconciling items:

Bob Evans Restaurants' segment-related costs totaling $1.7 million, including:

  • $2.0 million in noncash charges for restaurant impairments, which increased the SG&A line and impairment of assets held for sale line;
  • $1.4 million in charges related to restructuring and severance, which increased the SG&A line; partially offset by
  • $0.5 million of equity compensation adjustments, which decreased the operating wages line; and
  • $1.2 million net gain on sale of assets, which decreased the SG&A line.

BEF Foods' segment-related costs totaling $3.7 million, including:

  • $3.0 million in noncash charges for impairment of assets held for sale related to the Richardson, Texas, plant closure, which increased the impairment of assets held for sale line;
  • $0.8 million in charges for severance and retention payments for the Bidwell and Springfield, Ohio, and Richardson,Texas, plant closures and the Kettle Creations acquisition, which increased the SG&A line; partially offset by
  • $0.1 million net gain on sale of assets, which decreased the SG&A line.

Discontinued operations, including:

  • Mimi's Cafe-related costs totaling $0.2 million to adjust for discontinued operations, which primarily increased the SG&A line.  

GAAP net interest expense includes $0.4 million of noncash accretion on the discounted value for the $30 million note received from the purchaser of Mimi's Cafe, which is being excluded for non-GAAP purposes.  The note, with an original term of seven years, was discounted to $13.6 million during the sale and will accrete throughout the remaining term.

The GAAP pretax income from continuing operations for the second quarter of fiscal 2014 was $8.8 million.  After adjusting for the negative net pretax impact of $5.1 million of non-GAAP reconciling items above, non-GAAP pretax earnings from continuing operations were $13.7 million.

On a GAAP basis, income taxes for the second quarter of fiscal 2014 were 28.6 percent on income from continuing operations.  For non-GAAP items, the Company used an effective tax rate of 31 percent.  Total non-GAAP income tax expenses were $4.0 million from continuing operations, and non-GAAP net income from continuing operations was $9.5 million.

GAAP earnings per diluted share for the second quarter of fiscal 2014 were $0.23.  Excluding the net impact of the aforementioned charges, non-GAAP diluted earnings per share were $0.35.

Additionally, operating profit in the second quarter of fiscal 2014 was reduced by approximately $11.0 million, or approximately $0.27 per diluted share, due to a higher than expected year-over-year increase in sow prices, and other short-term cost impacts, including approximately:

  • $9.0 million in the cost of sales line in increased sow costs in the BEF Foods segment compared to last year's second quarter. During the second quarter of fiscal 2014, sow costs averaged $77.33 per hundredweight compared to $43.22 per hundredweight for the comparable period last year. Sow costs are expected to average in the $65 to $70 range for the remainder of the fiscal year;
  • $1.1 million in the SG&A line related to additional professional services, primarily to strengthen the Company's internal processes and controls over financial reporting. The Company expects the remediation of existing material weaknesses to be complete by the end of this fiscal year; and
  • $0.9 million primarily due to the $0.5 million margin impact of lost sales, $0.2 million impact on the cost of sales line and $0.2 million SG&A costs associated with a supplier dispute related to BEF Foods' side dish business. The Company's former primary side dish supplier, who is also a competitor, unexpectedly stopped providing the Company with product in advance of the holiday season, causing lost sales as product supply was terminated. The Company no longer expects to be impacted by the supplier-related issues after December 2013 as the Lima, Ohio, facility comes fully online. Year-to-date, the Company estimates this supplier dispute has cost approximately $1.3 million.

Furthermore, results in the second quarter of 2014 were impacted by approximately $2 million, or $0.05 per diluted share, due to start-up costs and other expenses associated with transformational growth investments.  These items are comprised of the following:

  • $2.7 million from the margin impact of Farm Fresh Refresh costs, including incremental closed restaurant days, start-up costs in the SG&A line and incremental depreciation;
  • $2.5 million associated with the implementation of a new restaurant workforce management initiative. $1.7 million impacted the operating wages line, $0.4 million in the SG&A line, $0.2 million of incremental depreciation, $0.1 million of additional discounts, and $0.1 million in other operating expenses. During the first quarter of fiscal 2014, the Company indicated it was expecting $0.9 to $1.2 million of costs related to this project. The implementation costs were higher than expected primarily due to higher training costs and higher initial labor costs as restaurants transitioned to the new labor scheduling model. The project is complete and fully implemented;
  • $1.6 million in the SG&A line of carryover costs associated with the Mimi's Cafe sale and transition services support. $1.1 million of this total was allocated to Bob Evans Restaurants, and $0.5 million was allocated to BEF Foods. The Company was originally allocating approximately $10 million of corporate costs annually to Mimi's Cafe. Through cost reduction efforts, the Company has identified and eliminated approximately $6.0 to $7.0 million of these annual costs, with $3.0 to $4.0 million of benefit expected to be received during fiscal 2014, and the remainder to be realized during fiscal 2015;
  • $0.5 million in start-up costs associated with the plant expansions in Lima, Ohio, and Sulphur Springs, Texas. Cost of sales was impacted by $0.3 million and operating wages by $0.1 million; partially offset by
  • The benefit of not incurring $5.3 million of losses from Mimi's Cafe in the second quarter of fiscal 2013 that did not repeat this year.

Second-quarter fiscal 2013 consolidated results and GAAP to non-GAAP reconciliation:

The Company reported consolidated GAAP operating income from continuing operations of $23.5 million.  Operating income including Mimi's Cafe was $18.2 million. The second-quarter results include the negative net pretax impact of $5.7 million from the following items:

Bob Evans Restaurants' segment-related costs totaling $1.5 million, including:

  • $1.2 million in noncash charges for impairment of a non-operating property that increased the SG&A line;
  • $0.6 million in charges for the overhead allocation to adjust for discontinued operations, which increased the SG&A line; partially offset by
  • $0.3 million income for a net gain on the sale of assets that decreased the SG&A line; and

Bob Evans Foods' segment-related costs totaling $4.3 million, including:

  • $3.2 million in charges for severance and retention payments from plant closures and consolidations that increased SG&A;
  • $1.0 million in charges for Kettle Creations' acquisition-related costs that increased the SG&A line; and
  • $0.2 million in charges for the overhead allocation to adjust for discontinued operations, which increased the SG&A line.

Discontinued operations - Mimi's Cafe-related benefit totaling $0.1 million, including:

  • $0.6 million in charges for severance and restructuring activities that increased the SG&A line; partially offset by
  • $0.7 million for the overhead allocation to adjust for discontinued operations, which decreased the SG&A line.

Excluding the $5.7 million negative net pretax impact of these charges, the Company's second quarter fiscal 2013 non-GAAP operating income, including Mimi's, would have been approximately $23.9 million.  Non-GAAP operating income from continuing operations would have been $29.3 million.

Earnings per diluted share for the second quarter of fiscal 2013 were $0.40.  Excluding the net negative impact of the aforementioned charges, non-GAAP diluted earnings per share would have been $0.53.

Due to the nature of the items noted above, the Company uses non-GAAP financial measures excluding those items.  These financial measures are used by management to monitor and evaluate the ongoing performance of the Company.  The Company believes that the additional measures are useful to investors for financial analysis as excluding these items reflects operating results that are more indicative of the Company's ongoing operating performance and improve comparability to prior periods.   However, non-GAAP measures are not in accordance with, nor are they a substitute for, GAAP measures.  Please see the table in this release for a reconciliation of non-GAAP measures to GAAP results.  Results in the following discussion are presented on a non-GAAP basis excluding the items noted above.

Second-quarter fiscal 2014 Bob Evans Restaurants segment summary

Net sales – Bob Evans Restaurants' net sales were $240.5 million, down 2.4 percent compared to net sales of $246.3 million in the corresponding period last year, of which $1.6 million, or approximately 60 basis points, is related to the closure of six restaurants since the end of the second quarter of fiscal 2013.  Same-store sales declined by 1.9 percent, which lagged the Midscale Family Segment, according to The NPD Group's Sales Track Weekly. 

During the second quarter, the Farm Fresh Refresh remodeling program resulted in 411 closed restaurant days, compared to 290 in the corresponding period last year, equating to an estimated $0.2 million, or a 10 basis point negative same-store sales impact.  Operating income was negatively impacted by $2.4 million of incremental depreciation and $0.3 million due to closed restaurant days and other remodeling-related costs. 

During the second quarter of fiscal 2014, Bob Evans Restaurants:

  • remodeled 66 restaurants; and
  • opened one new restaurant located in Finneytown (Cincinnati), Ohio.

SSS
Restaurants

August

September

October

2Q  FY '14

Bob Evans

554

-0.7%

-2.0%

-2.9%

-1.9%

Farm Fresh Refresh Performance Summary:


Percent
Of SSS
Restaurants

2Q  FY '14

Remodeled

79%

-1.5%

  Within one year


-0.2%

  Over one year


-2.3%

Not Remodeled

21%

-3.6%

Cost of sales – Bob Evans Restaurants' cost of sales was 24.1 percent of net sales, compared to 23.8 percent of net sales in the corresponding period last year. On a rate basis, cost of sales was unfavorable by $0.8 million.  The increase was due to increased discount activity and commodity costs, partially offset by mix.  Bacon and other pork-related items, bakery, and poultry increased; partially offset by declines in beverages and desserts.

Operating wages – Bob Evans Restaurants' non-GAAP operating wages were 37.9 percent of net sales, compared to 37.4 percent in last year's corresponding period.  The increase in operating wages as a percentage of net sales was primarily due to the approximately $1.7 million cost of implementing a new workforce management initiative, including labor scheduling software and increased discounting.  All restaurants have been converted to the new program.

Other operating expenses – Bob Evans Restaurants' other operating expenses were $43.9 million in the second quarter of fiscal 2014, compared to other operating expenses of $44.6 million in the corresponding period last year. The decrease was due primarily to reductions in utilities, direct operating expenses, and advertising and promotional expenditures, partially offset by increases in preopening expenses. 

SG&A – Bob Evans Restaurants' non-GAAP SG&A expenses were $19.2 million, compared to non-GAAP SG&A expenses of $17.3 million in the corresponding period last year. The $1.8 million increase was due primarily to a $1.1 million increase in corporate overhead allocation as a result of the Company providing transition services to Mimi's Cafe at less than cost; $1.1 million of additional professional fees, including $0.8 million of costs related to strengthening the Company's internal processes and controls over financial reporting; and $0.4 million of incremental travel and training expenses related to implementation of the new workforce management initiative.  These increases were partially offset by approximately $1.0 million of reductions in the Company's performance based incentive compensation and other net SG&A cost savings.

Operating Income – Bob Evans Restaurants' non-GAAP operating income was $13.6 million, compared to non-GAAP operating income of $20.6 million in the corresponding period last year. The decrease was due to: sales deleverage; $1.8 million of incremental SG&A expenses, resulting from costs associated with providing transition services to the buyer of Mimi's Cafe and increased professional fees; approximately $1.7 million of operating wages related to the introduction of the new workforce management initiative; $1.7 million of incremental depreciation expense primarily related to spending associated with the Farm Fresh Refresh remodel program; and $0.8 million of unfavorable cost of sales rate variance. 

Second-quarter fiscal 2014 BEF Foods segment summary

During the quarter, an outside supplier, who is also a competitor, unexpectedly cut off refrigerated side dish sales to the Company in advance of the key holiday period costing the company approximately $0.9 million.  The Company had expected this supplier to produce seasonal side dishes as they have customarily done.  As a result of the supplier's actions, the Company was forced to cut customer orders during the quarter.  The $0.9 million is composed of approximately $0.5 million of profitability related to the cut sales orders, as well as $0.2 million related to price increases from the supplier prior to the sales cutoff, and $0.2 million of associated legal fees.    

Net sales – BEF Foods' net sales were $92.1 million, an increase of 10.6 percent, compared to net sales of $83.3 million in the corresponding period last year.  The increase was primarily due to mix.  Total pounds sold increased slightly.  Net sales were unfavorably impacted by approximately $2.4 million resulting from the actions of the disruptive supplier.

Cost of sales – BEF Foods' cost of sales was $53.0 million, or 57.6 percent of net sales, compared to $39.4 million, or 47.4 percent of net sales, in the second quarter of fiscal 2013. The increase was due primarily to the $9.0 million increase in sow costs as cost per hundredweight increased to an average of $77.33 from $43.22 during the corresponding period last year.  In January 2014, the Company will increase sausage prices, which we expect to fully offset the projected sow cost increase for the second half of the fiscal year and partially offset the impact of increased sow costs during the first half of the fiscal year.  Cost of sales also includes $0.3 million of start-up expenses associated with the Lima and Sulphur Springs plant expansions, and $0.2 million for above market prices charged by the supplier referenced above.  The plant expansions are expected to be fully operational with the start-up costs expected to end early in the third quarter of fiscal 2014.

Operating wages – BEF Foods' operating wages were $10.0 million, or 10.9 percent of net sales, compared to $9.4 million, or 11.3 percent of net sales, in the corresponding period last year.  Operating wages also includes $0.1 million in start-up costs associated with the Lima and Sulphur Springs plant expansions.

Other operating expenses – BEF Foods' other operating expenses were $8.1 million, or 8.8 percent of net sales, compared to $6.8 million, or 8.2 percent of net sales, in the corresponding period last year.  Increased production volume was the primary driver of the increase.

SG&A – BEF Foods' non-GAAP SG&A expenses were $16.8 million, compared to non-GAAP SG&A expenses of $15.7 million in the corresponding period last year.  The increase in non-GAAP SG&A expenses is due to:  $0.7 million of additional professional fees, including $0.3 million related to strengthening the Company's internal processes and controls over financial reporting, and a dispute with a side-dish supplier; a $0.5 million increase of corporate overhead allocation as a result of the Company providing transition services to Mimi's Cafe at less than cost; and $0.1 million related to ERP implementation, partially offset by $0.2 million of reductions in the Company's performance based incentive compensation programs and other net SG&A cost savings.

Operating Income – BEF Foods' non-GAAP operating income was $0.6 million, compared to non-GAAP operating income of $8.6 million in the corresponding period last year.  The primary drivers of the decline were: the $9.0 million of incremental sow costs; $0.9 million related to the supplier dispute including the profit effect of lost sales and higher co-packer prices before supply was cut off; professional fees; and the incremental SG&A expense primarily from increased legal and professional expenditures and the costs associated with providing transition services to the buyer of Mimi's Cafe, partially offset by sales leverage. 

Second-quarter fiscal 2014 consolidated income statement summary

Below is a summary of key variances in the Company's non-GAAP consolidated second-quarter fiscal 2014 income statement.

Net sales – Consolidated net sales from continuing operations were $332.6 million for the quarter, up approximately 1 percent, compared to net sales of $329.6 million in the corresponding period last year, excluding Mimi's Cafe.  The increase in consolidated net sales was due to 10.6 percent sales growth at BEF Foods, partially offset by a 2.4 percent net sales decline at Bob Evans Restaurants.  

Operating income – Consolidated non-GAAP operating income from continuing operations was $14.2 million in the second quarter of fiscal 2014, compared to non-GAAP operating income from continuing operations of $29.3 million in the corresponding period last year.  Including Mimi's Cafe, non-GAAP operating income in the second quarter of fiscal 2013 was $23.9 million.  Bob Evans Restaurants' non-GAAP operating income declined $7.1 million and BEF Foods' non-GAAP operating income declined $8.0 million, partially offset by the absence of the Mimi's Cafe, which reported a $5.3 million non-GAAP loss last year.

Net interest expense – The Company's non-GAAP net interest expense was $0.6 million in the second quarter of fiscal 2014, compared to $1.5 million in the corresponding period last year. The decrease was the result of lower interest rates, partially offset by higher revolving line of credit borrowings.  The borrowing rate on the Company's $318.2 million of debt was 1.5% at the end of the second quarter of 2014. 

Diluted weighted-average shares outstanding – The Company's diluted weighted-average shares outstanding were 27.2 million shares in the second quarter of fiscal 2014, compared to 28.5 million shares in the corresponding period last year.  There were 26.5 million shares outstanding at the end of the quarter, compared to 28.1 million shares in the corresponding period last year.  The Company repurchased 1.2 million shares for $68.6 million in the quarter. 

Fiscal year 2014 outlook

The Company expects fiscal 2014 non-GAAP earnings per share of $2.60 to $2.65, which includes an estimated $0.09 to $0.11 per diluted share net accretive effect of the newly expanded $225 million fiscal 2014 share repurchase program.  The Company's fiscal 2014 non-GAAP earnings per share guidance includes the following assumptions:

  • Bob Evans Restaurants' operating income reaching guidance levels through same-store sales growth driven by the remodel program, sales related to the restaurants remaining open for the first time on Thanksgiving Day, successful rollover of February 2013 sales weakness, fewer Farm Fresh Refresh closed days, new tiered value platform messaging, strong new holiday programming, and cost controls.
  • BEF Foods' operating income reaching guidance levels through successful price increases designed to offset higher sow costs in the second half of the year; the benefit of the third quarter plant closures; and second half fiscal 2014 sow costs averaging in the $65 to $70 range.

This outlook is subject to a number of factors beyond the Company's control, including the risk factors discussed in the Company's fiscal 2013 annual report on Form 10‑K and its other subsequent filings with the Securities and Exchange Commission.  In addition, the Company's outlook for fiscal year 2014 relies on a number of important assumptions, including the following:

Consolidated company highlights

  • Net sales approximately $1.4 billion.
  • Capital expenditures approximately $175 to $200 million. Key items include the expansion of the Lima and Sulphur Springs plants, the acceleration of the Farm Fresh Refresh remodel program, four new Bob Evans Restaurants, the completion of the new corporate campus, and the ERP implementation project.
  • Depreciation and amortization – approximately $70 to $80 million.
  • Net interest expense – approximately $4.5 to $5.0 million, including the anticipated effect of the $225 million share repurchase program.
  • Tax Rate – approximately 30 to 31 percent range for the second half of the fiscal year.
  • Diluted weighted-average share count approximately 26.3 to 26.6 million shares, including the effect of the $225 million share repurchase program.

Bob Evans Restaurants segment 

  • Net sales: Same-store sales flat to up 1 percent for the second half of the fiscal year, driven by the expected second-half fiscal 2014 sales improvement from Farm Fresh Refresh remodels and value platforms. The Company continues to expect approximately 1,400 closed restaurant days throughout fiscal 2014, compared to 1,337 during fiscal 2013. The expected year-over-year negative impact of incremental closed restaurant days during the first half of fiscal 2014 is expected to reverse to a benefit during the second half of the fiscal year, primarily in the fourth quarter. 

    For the first time in recent history, the restaurants were open for Thanksgiving Day. The Company expects these incremental sales to benefit third-quarter results. Additionally, fourth quarter same-store sales should benefit relative to weak February 2013 sales. The Company also expects to open four new restaurants during fiscal 2014, of which three will utilize the Company's new prototype design. The Company opened the first of these restaurants in May 2013, and the second, with the new prototype design, in late September. The third will open in Altoona, Pennsylvania, in December 2013. The remaining restaurant is expected to open during the fourth quarter of fiscal 2014.

  • Cost of sales: Commodity inflation of 2.0 to 3.0 percent to reflect higher year-over-year pork, gravy, sauces and soup costs.
  • Operating margins: 7.5 to 8.0 percent, with forecasted commodity costs being partially offset by increased pricing. Incorporated within this guidance is the accelerated Farm Fresh Refresh remodeling program; investments in the new workforce management initiative, and new restaurant development, which will increase preopening expenses; investments in ERP; and an increased corporate overhead allocation as a result of the Company providing transition services to Mimi's Cafe at less than cost.

BEF Foods segment

  • Net sales: Overall net sales of $380 to $400 million, up approximately 10 to 15 percent. The Company is raising prices on sausage products to reflect the higher sow costs experienced year to date. The Company expects the full effect of the pricing actions to take place in January 2014.
  • Cost of sales: The Company expects average sow costs in the range of $65 to $70 per hundredweight range for the remainder of fiscal year 2014. 
  • Operating margins: 7.5 to 8.0 percent. During the second half of the fiscal year, the Company expects to benefit from the closure of the Bidwell and Springfield, Ohio, and Richardson, Texas, facilities; higher sausage prices; and a likely December 2013 end to the adverse impact of the disruptive supplier actions referenced earlier. The Company believes the plant consolidation and expansion projects will generate an annualized 2.5 percent margin point improvement by fiscal 2015 beginning in the second half of fiscal 2014.

Company to host conference call on Wednesday, December 4, 2013

The Company will host a conference call to discuss its second-quarter fiscal 2014 results at 10 a.m. (ET) on Wednesday, December 4, 2013.  The dial-in number is (800) 690-3108, access code 93839960. A replay will be available at (800) 585-8367, access code 93839960.

A simultaneous webcast will be available at investors.bobevans.com/events.cfm. The archived webcast will also be available on the Web site.

About Bob Evans Farms, Inc.

Bob Evans Farms, Inc. owns and operates full-service restaurants under the Bob Evans Restaurants brand name.  At the end of the second fiscal quarter (October 25, 2013), Bob Evans Restaurants owned and operated 561 family restaurants in 19 states, primarily in the Midwest, mid-Atlantic and Southeast regions of the United States. Bob Evans Farms, Inc., through its BEF Foods segment, is also a leading producer and distributor of refrigerated side dishes, pork sausage and a variety of refrigerated and frozen convenience food items under the Bob Evans and Owens brand names.  For more information about Bob Evans Farms, Inc., visit www.bobevans.com.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Certain statements in this news release that are not historical facts are forward-looking statements. Forward-looking statements involve various important assumptions, risks and uncertainties. Actual results may differ materially from those predicted by the forward-looking statements because of various factors and possible events. We discuss these factors and events, along with certain other risks, uncertainties and assumptions, under the heading "Risk Factors" in Item 1A of our Annual Report on Form 10-K for the fiscal year ended April 26, 2013, and in our other filings with the Securities and Exchange Commission. We note these factors for investors as contemplated by the Private Securities Litigation Reform Act of 1995. Predicting or identifying all such risk factors is impossible. Consequently, investors should not consider any such list to be a complete set of all potential risks and uncertainties. Forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to update any forward-looking statement to reflect circumstances or events that occur after the date of the statement to reflect unanticipated events. All subsequent written and oral forward-looking statements attributable to us or any person acting on behalf of the Company are qualified by the cautionary statements in this section.

 


Bob Evans Farms, Inc.
Earnings Release Fact Sheet (unaudited)
Fiscal 2014 – Quarter 2
Note: amounts are in thousands, except per share amounts
Second quarter (Q2), ended October 25, 2013, compared to the corresponding period a year ago:







Basic EPS

Diluted EPS





Three Months Ended

Three Months Ended

Three Months Ended





Oct 25, 2013

Oct 26, 2012 (1)

Oct 25, 2013

Oct 26, 2012

Oct 25, 2013

Oct 26, 2012


Operating income as reported


(recast)


(recast)


(recast)



Bob Evans Restaurants

$ 11,912

$ 19,174







BEF Foods

(3,017)

4,299






Total operating income from continuing operations

8,895

23,473






Net interest expense

140

1,473






Pre-tax income from continuing operations

8,755

22,000






Income tax  provision

2,502

7,450






Income from continuing operations as reported

6,253

14,550

$ 0.23

$ 0.51

$ 0.23

$ 0.51












Total operating and pre-tax loss from discontinued operations

(180)

(5,229)






Income tax benefit

(46)

(1,990)






Loss from discontinued operations as reported

(134)

(3,239)

$ (0.00)

$ (0.11)

$ (0.00)

$ (0.11)


Net income as reported

6,119

11,311

$ 0.23

$ 0.40

$ 0.23

$ 0.40












Adjustments









Bob Evans Restaurants










Impairments including  from Assets Held for Sale

1,955

1,227








Severance/Restructuring

1,348

13








Gain  on sale of assets

(1,214)

(327)








Other

(422)

-








Overhead allocation  to adj discontinued operations

-

554









1,667

1,467







BEF Foods










Impairments including  from Assets Held for Sale

3,000

-








Severance/Restructuring

766

3,185








Merger and Acquisition Related Costs

-

955








Gain  on sale of assets

(112)

(3)








Overhead allocation  to adj discontinued operations

-

184









3,654

4,321







Discontinued operations










Severance/Restructuring

-

619








Adjustments to discontinued operations

180

-








Overhead allocation  to adj discontinued operations

-

(738)









180

(119)






Total adjustments










Impairments including  from Assets Held for Sale

4,955

1,227








Severance/Restructuring

2,114

3,817








Merger and Acquisition Related Costs

-

955








Gain on Sale of Assets

(1,326)

(330)








Other

(422)

-








Adjustments to discontinued operations

180

-









5,501

5,669






Non-GAAP operating income (loss)









Bob Evans Restaurants

13,579

20,641







BEF Foods

637

8,620







Total non-GAAP operating income from continuing operations

14,216

29,261







Total non-GAAP loss from discontinued operations

-

(5,348)







Total non-GAAP operating income

14,216

23,913






















Continuing Operations







Adjustments to net interest expense

419

-







Non-GAAP net interest expense

559

1,473







Non-GAAP pre-tax income from continuing operations

13,657

27,788







Adjustments to income tax provision

1,650

1,969







Non-GAAP income tax provision

4,151

9,419






Non-GAAP income from continuing operations

9,505

18,369

$ 0.35

$ 0.65

$ 0.35

$ 0.64












 

 

 

Discontinued Operations









Non-GAAP pre-tax loss from disc operations 

-

(5,348)







Adjustments to income tax benefit

56

(40)







Non-GAAP income tax provision (benefit)

10

(2,029)






Non-GAAP loss from discontinued operations

(10)

(3,318)

$ (0.00)

$ (0.12)

$ (0.00)

$ (0.12)


Non-GAAP net income

$ 9,495

$ 15,052

$ 0.35

$ 0.53

$ 0.35

$ 0.53












Shares Outstanding



27,086

28,398

27,184

28,536












(1) During the second quarter, the Company adjusted prior period balances related to accounting for property plant and equipment.  The Company also adjusted prior period balances related to federal and state income tax receivables and deferred income taxes. The impact of these adjustments was not material in any of the prior years; however, the cumulative effect would have been material to the current year.  The Company also adjusted the impact of an error on the provision for income taxes of $777,000 to our Quarterly Report on form 10Q dated July 26, 2013 that was material to that quarter but is not expected to be material to our fiscal year ending April 25, 2014 consolidated statements of operations. 




 

















Basic EPS

Diluted EPS





Six Months Ended

Six Months Ended

Six Months Ended





Oct 25, 2013 (1)

Oct 26, 2012 (1)

Oct 25, 2013

Oct 26, 2012

Oct 25, 2013

Oct 26, 2012


Operating income as reported


(recast)


(recast)


(recast)



Bob Evans Restaurants

$ 18,394

$ 36,452







BEF Foods

2,500

12,149






Total operating income from continuing operations

20,894

48,601






Net interest (income) expense

(16)

3,529






Pre-tax income from continuing operations

20,910

45,072






Income tax  provision

6,281

15,299






Income from continuing operations as reported

14,629

29,773

$ 0.54

$ 1.05

$ 0.53

$ 1.05












Total operating and pre-tax loss from discontinued operations

(180)

(5,559)






Income tax benefit

(46)

(2,206)






Loss from discontinued operations as reported

(134)

(3,353)

$ (0.00)

$ (0.12)

$ (0.00)

$ (0.12)


Net income as reported

14,495

26,420

$ 0.53

$ 0.93

$ 0.53

$ 0.93












Adjustments









Bob Evans Restaurants










Impairments including  from Assets Held for Sale

11,743

1,227








Severance/Restructuring

760

797








Merger and Acquisition Related Costs

5

-








Gain on sale of assets

(1,300)

(197)








Other

(20)

-








Overhead allocation to adj discontinued operations

-

1,006








Total Bob Evans Restaurants adjustments

11,188

2,833

















BEF Foods










Impairments including  from Assets Held for Sale

3,000

-








Severance/Restructuring

1,767

3,945








Merger and Acquisition Related Costs

23

1,399








Loss (gain)  on sale of assets

52

(5)








Overhead allocation to adj discontinued operations

-

334









4,842

5,673







Discontinued operations










Severance

-

619








Adjustments to discontinued operations

180

-








Overhead allocation to adj discontinued operations

-

(1,340)









180

(721)






Total adjustments










Impairments including  from Assets Held for Sale

14,743

1,227








Severance/Restructuring

2,527

5,361








Merger and Acquisition Related Costs

28

1,399








Gain on Sale of Assets

(1,248)

(202)








Other

(20)

-








Adjustments to discontinued operations

180

-









16,210

7,785






Non-GAAP operating income (loss)









Bob Evans Restaurants

29,582

39,285







BEF Foods

7,342

17,822







Total non-GAAP operating income from continuing operations

36,924

57,107







Total non-GAAP loss from discontinued operations

-

(6,280)







Total non-GAAP operating income

36,924

50,828






Continuing Operations









Adjustments to net interest expense

1,081

-







Non-GAAP net interest expense

1,065

3,529







Non-GAAP pre-tax income from continuing operations

35,859

53,579







Adjustments to income tax provision

4,865

2,891







Non-GAAP income tax provision

11,146

18,190






Non-GAAP income from continuing operations

24,713

35,389

$ 0.91

$ 1.25

$ 0.90

$ 1.24












Discontinued Operations









Non-GAAP pre-tax loss from disc operations 

-

(6,280)







Adjustments to income tax benefit

56

(245)







Non-GAAP income tax provision (benefit)

10

(2,451)






Non-GAAP loss from discontinued operations

(10)

(3,829)

$ (0.00)

$ (0.14)

$ (0.00)

$ (0.13)


Non-GAAP net income

$ 24,704

$ 31,560

$ 0.91

$ 1.11

$ 0.90

$ 1.11












Shares Outstanding



27,287

28,307

27,402

28,449












(1) During the second quarter, the Company adjusted prior period balances related to accounting for property plant and equipment.  The Company also adjusted prior period balances related to federal and state income tax receivables and deferred income taxes. The impact of these adjustments was not material in any of the prior years; however, the cumulative effect would have been material to the current year.  The Company also adjusted the impact of an error on the provision for income taxes of $777,000 to our Quarterly Report on form 10Q dated July 26, 2013 that was material to that quarter but is not expected to be material to our fiscal year ending April 25, 2014 consolidated statements of operations. 





 




Consolidated (Includes Discontinued Ops)

Bob Evans Restaurants



Three Months Ended

Three Months Ended



Oct 25, 2013

% of Sales

Oct 26, 2012 (1)

% of Sales

Oct 25, 2013

% of Sales

Oct 26, 2012 (1)

% of Sales

Operating income as reported



(recast)



(recast)












Net sales

$ 332,600


$ 410,877


$ 240,500


$ 246,302



Cost of sales

111,071

33.4%

119,292

29.0%

58,039

24.1%

58,625

23.8%


Operating wages

100,652

30.3%

133,606

32.5%

90,639

37.7%

92,079

37.4%


Other operating

52,028

15.6%

72,171

17.6%

43,895

18.3%

44,562

18.1%


SG&A

38,083

11.5%

45,539

11.1%

20,526

8.5%

18,805

7.6%


Depr &  amort

18,281

5.5%

22,025

5.4%

14,716

6.1%

13,057

5.3%


Impairment of assets held for sale

3,771

1.1%

-

0.0%

771

0.3%

-

0.0%


Total as Reported

8,715

2.6%

18,244

4.4%

11,912

5.0%

19,174

7.8%












Net sales

-


-


-


-



Operating wages

458


-


453


-



Other operating

(33)


-


-


-



SG&A

(2,155)


(5,670)


(1,349)


(1,467)



Impairment of assets held for sale

(3,771)


-


(771)


-


Non-GAAP operating income

5,501


5,669


1,666


1,467













Net sales

332,600


410,877


240,500


246,302



Cost of sales

111,071

33.4%

119,292

29.0%

58,039

24.1%

58,625

23.8%


Operating wages

101,109

30.4%

133,606

32.5%

91,093

37.9%

92,079

37.4%


Other operating

51,994

15.6%

72,170

17.6%

43,895

18.3%

44,562

18.1%


SG&A

35,929

10.8%

39,869

9.7%

19,177

8.0%

17,339

7.0%


Depr &  amort

18,281

5.5%

22,025

5.4%

14,716

6.1%

13,057

5.3%


Total non-GAAP operating income

14,216

4.3%

23,914

5.8%

13,578

5.6%

20,641

8.4%























Consolidated (Continuing Operations)







Three Months Ended







Oct 25, 2013

% of Sales

Oct 26, 2012 (1)

% of Sales





Non-GAAP operating income




















Net sales

$ 332,600


$ 329,555







Cost of sales

111,071

33.4%

98,064

29.8%






Operating wages

101,109

30.4%

101,470

30.8%






Other operating

51,994

15.6%

51,372

15.6%






SG&A

35,929

10.8%

33,075

10.0%






Depr &  amort

18,281

5.5%

16,312

4.9%






Total non-GAAP operating income

14,216

4.3%

29,261

8.9%
















(1) During the second quarter, the Company adjusted prior period balances related to accounting for property plant and equipment.  The Company also adjusted prior period balances related to federal and state income tax receivables and deferred income taxes. The impact of these adjustments was not material in any of the prior years; however, the cumulative effect would have been material to the current year.  The Company also adjusted the impact of an error on the provision for income taxes of $777,000 to our Quarterly Report on form 10Q dated July 26, 2013 that was material to that quarter but is not expected to be material to our fiscal year ending April 25, 2014 consolidated statements of operations. 





























































































BEF Foods

Discontinued Operations



Three Months Ended

Three Months Ended



Oct 25, 2013

% of Sales

Oct 26, 2012 (1)

% of Sales

Oct 25, 2013

% of Sales

Oct 26, 2012 (1)

% of Sales

Operating income as reported



(recast)



(recast)












Net sales

$ 92,100


$ 83,253


$ -


$ 81,322



Cost of sales

53,032

57.6%

39,440

47.4%

-

0.0%

21,228

26.1%


Operating wages

10,017

10.9%

9,392

11.3%

(4)

0.0%

32,136

39.5%


Other operating

8,099

8.8%

6,810

8.2%

34

0.0%

20,799

25.6%


SG&A

17,404

18.9%

20,057

24.1%

150

0.0%

6,675

8.2%


Depr &  amort

3,565

3.9%

3,255

3.9%

-

0.0%

5,713

7.0%


Impairment of assets held for sale

3,000

3.3%

-

0.0%

-

0.0%

-

0.0%


Total as Reported

(3,017)

-3.3%

4,299

5.2%

(180)

0.0%

(5,229)

-6.4%











Adjustments




















Operating wages

-


-


4


-



Other operating

-


-


(34)


-



SG&A

(654)


(4,321)


(150)


119



Impairment of assets held for sale

(3,000)


-


-


-




3,654


4,321


180


(119)


Non-GAAP operating income










Net sales

92,100


83,253


-


81,322



Cost of sales

53,032

57.6%

39,440

47.4%

-

0.0%

21,228

26.1%


Operating wages

10,017

10.9%

9,392

11.3%

-

0.0%

32,136

39.5%


Other operating

8,099

8.8%

6,810

8.2%

-

0.0%

20,799

25.6%


SG&A

16,751

18.2%

15,736

18.9%

(0)

0.0%

6,794

8.4%


Depr &  amort

3,565

3.9%

3,255

3.9%

-

0.0%

5,713

7.0%


Total non-GAAP operating income

637

0.7%

8,620

10.4%

(0)

-

(5,348)

-6.6%












(1) During the second quarter, the Company adjusted prior period balances related to accounting for property plant and equipment.  The Company also adjusted prior period balances related to federal and state income tax receivables and deferred income taxes. The impact of these adjustments was not material in any of the prior years; however, the cumulative effect would have been material to the current year.  The Company also adjusted the impact of an error on the provision for income taxes of $777,000 to our Quarterly Report on form 10Q dated July 26, 2013 that was material to that quarter but is not expected to be material to our fiscal year ending April 25, 2014 consolidated statements of operations. 

 




Consolidated (Includes Discontinued Ops)

Bob Evans Restaurants



Six Months Ended

Six Months Ended



October 25, 2013 (1)

% of Sales

October 26, 2012 (1)

% of Sales

October 25, 2013 (1)

% of Sales

October 26, 2012 (1)

% of Sales

Operating income as reported



(recast)



(recast)












Net sales

$ 662,049


$ 820,592


$ 485,051


$ 494,268



Cost of sales

215,576

32.6%

240,076

29.3%

118,556

24.4%

118,101

23.9%


Operating wages

202,364

30.6%

267,217

32.6%

182,726

37.7%

185,996

37.6%


Other operating

103,010

15.6%

143,192

17.4%

87,344

18.0%

90,019

18.2%


SG&A

72,493

10.9%

83,975

10.2%

39,744

8.2%

37,700

7.6%


Depr &  amort

35,511

5.4%

43,089

5.3%

28,907

6.0%

26,000

5.3%


Impairment of assets held for sale

12,380

1.9%

-

0.0%

9,380

1.9%

-

0.0%


Total as Reported

20,714

3.1%

43,043

5.2%

18,394

3.8%

36,452

7.4%











Adjustments










Net sales

(0)


(0)


-


-



Operating wages

457


-


453


-



Other operating

74


-


-


(0)



SG&A

(4,413)


(7,785)


(2,312)


(2,833)



Depr &  amort

51


-


51


-



Impairment of assets held for sale

(12,380)


-


(9,380)


-


Non-GAAP operating income

16,210


7,785


11,188


2,833













Net sales

662,049


820,592


485,051


494,268



Cost of sales

215,576

32.6%

240,076

29.3%

118,556

24.4%

118,101

23.9%


Operating wages

202,821

30.6%

267,217

32.6%

183,179

37.8%

185,996

37.6%


Other operating

103,084

15.6%

143,192

17.4%

87,344

18.0%

90,019

18.2%


SG&A

68,081

10.3%

76,189

9.3%

37,432

7.7%

34,867

7.1%


Depr &  amort

35,562

5.4%

43,089

5.3%

28,958

6.0%

26,000

5.3%


Total non-GAAP operating income

36,924

5.6%

50,828

6.2%

29,582

6.1%

39,285

7.9%























Consolidated (Continuing Operations)







Six Months Ended







October 25, 2013 (1)

% of Sales

October 26, 2012 (1)

% of Sales





Non-GAAP operating income




















Net sales

$ 662,049


$ 652,996







Cost of sales

215,576

32.6%

195,818

30.0%






Operating wages

202,821

30.6%

202,798

31.1%






Other operating

103,084

15.6%

102,650

15.7%






SG&A

68,083

10.3%

63,003

9.6%






Depr &  amort

35,562

5.4%

31,620

4.8%






Total non-GAAP operating income

36,924

5.6%

57,107

8.7%
















(1) During the second quarter, the Company adjusted prior period balances related to accounting for property plant and equipment.  The Company also adjusted prior period balances related to federal and state income tax receivables and deferred income taxes. The impact of these adjustments was not material in any of the prior years; however, the cumulative effect would have been material to the current year.  The Company also adjusted the impact of an error on the provision for income taxes of $777,000 to our Quarterly Report on form 10Q dated July 26, 2013 that was material to that quarter but is not expected to be material to our fiscal year ending April 25, 2014 consolidated statements of operations. 

 
























BEF Foods

Discontinued Operations



Six Months Ended

Six Months Ended



October 25, 2013 (1)

% of Sales

October 26, 2012 (1)

% of Sales

October 25, 2013 (1)

% of Sales

October 26, 2012 (1)

% of Sales

Operating income as reported


(recast)



(recast)












Net sales

$ 176,998


$ 158,728


$ -


$ 167,597



Cost of sales

97,020

54.8%

77,717

49.0%

-

0.0%

44,258

26.4%


Operating wages

19,642

11.1%

16,802

10.6%

(3)

0.0%

64,419

38.4%


Other operating

15,633

8.8%

12,630

8.0%

33

0.0%

40,542

24.2%


SG&A

32,600

18.4%

33,809

21.3%

150

0.0%

12,467

7.4%


Depr &  amort

6,604

3.7%

5,619

3.5%

-

0.0%

11,470

6.8%


Impairment of assets held for sale

3,000

1.7%

-

0.0%

-

0.0%

-

0.0%


Total as Reported

2,500

1.4%

12,150

7.7%

(180)

0.0%

(5,558)

-3.3%











Adjustments




















Operating wages

-


-


3


-



Other operating

107


-


(33)


-



SG&A

(1,947)


(5,673)


(150)


720



Impairment of assets held for sale

(3,000)


-


-


-


Non-GAAP operating income

4,842


5,673


180


(720)













Net sales

176,998


158,728


-


167,597



Cost of sales

97,020

54.8%

77,717

49.0%

-


44,258

26.4%


Operating wages

19,642

11.1%

16,802

10.6%

-


64,419

38.4%


Other operating

15,740

8.9%

12,631

8.0%

-


40,542

24.2%


SG&A

30,651

17.3%

28,136

17.7%

-


13,186

7.9%


Depr &  amort

6,604

3.7%

5,619

3.5%

-


11,470

6.8%


Total non-GAAP operating income

7,342

4.1%

17,822

11.2%

-


(6,279)

-3.7%












(1) During the second quarter, the Company adjusted prior period balances related to accounting for property plant and equipment.  The Company also adjusted prior period balances related to federal and state income tax receivables and deferred income taxes. The impact of these adjustments was not material in any of the prior years; however, the cumulative effect would have been material to the current year.  The Company also adjusted the impact of an error on the provision for income taxes of $777,000 to our Quarterly Report on form 10Q dated July 26, 2013 that was material to that quarter but is not expected to be material to our fiscal year ending April 25, 2014 consolidated statements of operations. 









































 


Consolidated Results


Three Months Ended


October 25, 2013


% of sales


October 26,
2012 (1)


% of sales






(recast)


(recast)









Net sales

$ 332,600




$ 329,555











Cost of sales

111,071


33.4%


98,064


29.8%

Operating wages

100,656


30.3%


101,470


30.8%

Other operating

51,993


15.6%


51,372


15.6%

S,G&A

37,933


11.4%


38,865


11.8%

Depreciation and amortization

18,281


5.5%


16,311


4.9%

Impairment of assets held for sale

3,771


1.1%


-


0.0%

Operating income from continuing operations

8,895


2.7%


23,473


7.1%

Net interest expense

140


0.0%


1,473


0.4%

Pre-tax income from continuing operations

8,755


2.6%


22,000


6.7%

Provision for income taxes

2,502


0.8%


7,450


2.3%

Income from continuing operations

6,253


1.9%


14,550


4.4%

Loss from discontinued operations, net of tax

(134)


0.0%


(3,239)


-1.0%

Net Income

$ 6,119


1.8%


$ 11,311


3.4%









EPS - income from continuing operations:








Basic

$ 0.23




$ 0.51



Diluted

$ 0.23




$ 0.51











EPS - loss from discontinued operations:








Basic

$ -




$ (0.11)



Diluted

$ -




$ (0.11)











EPS - net income:








Basic

$ 0.23




$ 0.40



Diluted

$ 0.23




$ 0.40











Dividends paid per share:

$ 0.310




$ 0.280











Weighted average shares outstanding:








Basic

27,086




28,398



Dilutive stock options

98




138



Diluted

27,184




28,536











Shares outstanding at quarter end:

26,472




28,100











Income taxes related to continuing operations, as a percentage of pre-tax income, were 28.6% vs. 33.9%.

 



Segment Results



Three Months Ended



Bob Evans Restaurants


BEF Foods



October 25, 2013


October 26, 2012(1)


October 25, 2013


October 26, 2012(1)





(recast)




(recast)











Net sales

$ 240,500


$ 246,302


$ 92,100


$ 83,253











Cost of sales

24.1%


23.8%


57.6%


47.4%


Operating wages

37.7%


37.4%


10.9%


11.3%


Other operating

18.3%


18.1%


8.8%


8.2%


S,G&A

8.5%


7.6%


18.9%


24.1%


Depreciation and amortization

6.1%


5.3%


3.9%


3.9%


Impairment of assets held for sale

0.3%


0.0%


3.3%


0.0%


Operating income

5.0%


7.8%


-3.3%


5.2%











(1) During the second quarter, the Company adjusted prior period balances related to accounting for property plant and equipment.  The Company also adjusted prior period balances related to federal and state income tax receivables and deferred income taxes. The impact of these adjustments was not material in any of the prior years; however, the cumulative effect would have been material to the current year.  The Company also adjusted the impact of an error on the provision for income taxes of $777,000 to our Quarterly Report on form 10Q dated July 26, 2013 that was material to that quarter but is not expected to be material to our fiscal year ending April 25, 2014 consolidated statements of operations. 





 


Consolidated Results


Six Months Ended



October 25, 2013 (1)


% of sales


October 26, 2012 (1)


% of sales







(recast)


(recast)










Net sales


$ 662,049




$ 652,996












Cost of sales


215,576


32.6%


195,818


30.0%

Operating wages


202,368


30.6%


202,797


31.1%

Other operating


102,976


15.6%


102,650


15.7%

S,G&A


72,344


10.9%


71,510


11.0%

Depreciation and amortization


35,511


5.4%


31,620


4.8%

Impairment of assets held for sale


12,380


1.9%


-


0.0%

Operating income from continuing operations


20,894


3.2%


48,601


7.4%

Net interest (income) expense


(16)


0.0%


3,529


0.5%

Pre-tax income from continuing operations


20,910


3.2%


45,072


6.9%

Provision for income taxes


6,281


0.9%


15,299


2.3%

Income from continuing operations


14,629


2.2%


29,773


4.6%

Loss from discontinued operations, net of tax


(134)


0.0%


(3,353)


-0.5%

Net Income


$ 14,495


2.2%


$ 26,420


4.0%










EPS - income from continuing operations









Basic


$ 0.54




$ 1.05



Diluted


$ 0.53




$ 1.05












EPS - loss from discontinued operations









Basic


$ (0.00)




$ (0.12)



Diluted


$ (0.00)




$ (0.12)












EPS - net income









Basic


$ 0.53




$ 0.93



Diluted


$ 0.53




$ 0.93












Dividends paid per share:


$ 0.585




$ 0.530












Weighted average shares outstanding:



Basic


27,287




28,307



Dilutive stock options


115




142



Diluted


27,402




28,449












Shares outstanding at quarter end:


26,472




28,100












Income taxes related to continuing operations, as a percentage of pre-tax income, were 30.0% vs. 33.9%.

 




Segment Results



Six Months Ended



Bob Evans Restaurants


BEF Foods



October 25, 2013 (1)


October 26, 2012 (1)


October 25, 2013 (1)


October 26, 2012 (1)





(recast)




(recast)











Net sales

$ 485,051


$ 494,268


$ 176,998


$ 158,728











Cost of sales

24.4%


23.9%


54.8%


49.0%


Operating wages

37.7%


37.6%


11.1%


10.6%


Other operating

18.0%


18.2%


8.8%


8.0%


S,G&A

8.2%


7.6%


18.4%


21.3%


Depreciation and amortization

6.0%


5.3%


3.7%


3.5%


Impairment of assets held for sale

1.9%


0.0%


1.7%


0.0%


Operating income

3.8%


7.4%


1.4%


7.7%











(1) During the second quarter, the Company adjusted prior period balances related to accounting for property plant and equipment.  The Company also adjusted prior period balances related to federal and state income tax receivables and deferred income taxes. The impact of these adjustments was not material in any of the prior years; however, the cumulative effect would have been material to the current year.  The Company also adjusted the impact of an error on the provision for income taxes of $777,000 to our Quarterly Report on form 10Q dated July 26, 2013 that was material to that quarter but is not expected to be material to our fiscal year ending April 25, 2014 consolidated statements of operations. 





 

Bob Evans Restaurants openings and closings, by quarter:


























Future quarters represent estimates for fiscal year 2014.


















Fiscal Year


Beginning Total


Q1


Q2


Q3


Q4


Total


Closings


Ending Total


















2014


560


1


1


1


1


4


1


563

2013


565


2


-


-


-


2


7


560

2012


563


-


2


-


2


4


2


565

2011


569


-


-


-


2


2


8


563

2010


570


-


-


-


-


-


1


569

 

Rebuilt Bob Evans Restaurant openings, by quarter:














Fiscal Year


Q1


Q2


Q3


Q4


Total














2014


-


-


-


-


-


2013


-


-


-


-


-


2012


-


2


-


1


3


2011


-


-


1


1


2


2010


1


1


-


-


2













 


Full realization of Bob Evans Restaurant remodel benefits:




Fiscal Year





2012


2013


2014 Est.



Assumptions:









Remodel openings

87


195


228




Total days closed for remodels

653


1,337


1,435



Financial impact:









Closed day sales

$ 2,701


$ 6,331


$ 5,350




Pre-opening expense and repair and maintenance

$ 1,690


$ 3,624


$ 3,936


 


Bob Evans Restaurant remodel openings and pre-opening expense, by fiscal year and quarter:













Future quarters represent estimates for fiscal year 2014.














2014


Q1


Q2


Q3


Q4


Total














Lansing


12


2


-


-


14


Tampa


10


8


-


-


18


Buffalo/Erie


10


2


-


-


12


Cleveland


5


-


-


-


5


Orlando


5


9


-


-


14


South Bend


5


2


-


-


7


Chicago


4


8


4


-


16


FT Myers


6


3


-


2


11


Baltimore/DC


-


14


11


18


43


Philadelphia


-


6


6


9


21


St Louis


-


7


7


-


14


Kansas City


-


5


3


-


8


Charleston


-


-


6


22


28


Charlotte


-


-


2


6


8


Richmond


-


-


-


5


5


Pittsburgh


3


-


-


-


3


Nashville


-


-


-


1


1


Total


60


66


39


63


228














Pre-opening and repair and maintenance expense

$

1,176

$

1,050

$

660

$

1,050

$

3,936


Incremental administrative expense (est)

$

265

$

270

$

220

$

240

$

995


Total days closed for remodels


438


411


245


341


1,435














2013


Q1


Q2


Q3


Q4


Total














Cincinnati


2


-


-


-


2


Other markets


2


-


-


-


2


Columbus


24


17


-


-


41


Charleston


8


-


-


-


8


Ft. Wayne


-


7


4


-


11


Indianapolis


-


15


15


-


30


Flint


-


6


8


-


14


Louisville


-


-


6


20


26


Pittsburgh


-


-


-


16


16


Cleveland


-


-


7


38


45


Total restaurants


36


45


40


74


195














Pre-opening and repair and maintenance expense

$

570

$

828

$

819

$

1,407

$

3,624


Incremental administrative expense (est)

$

141


153

$

146

$

194

$

634


Total days closed for remodels


254


290


258


535


1,337














2012


Q1


Q2


Q3


Q4


Total














Toledo


1


17


7


-


25


Detroit


-


14


3


-


17


Cincinnati


-


-


2


23


25


Other markets


1


-


3


16


20


Total restaurants


2


31


15


39


87














Pre-opening and repair and maintenance expense

$

36

$

508

$

400

$

746

$

1,690


Incremental administrative expense (est)

$

7

$

108

$

52

$

136

$

303


Total days closed for remodels


7


221


118


307


653














2011


Q1


Q2


Q3


Q4


Total














Prototype


-


2


-


-


2


Dayton


-


-


10


19


29


Total restaurants


-


2


10


19


31














Pre-opening and repair and maintenance expense

$

-

$

80

$

263

$

245

$

588


Incremental administrative expense (est)

$


$

9

$

43

$

82

$

134


Total days closed for remodels


-


21


76


73


170














2010


Q1


Q2


Q3


Q4


Total














Total restaurants


-


-


-


1


1














Pre-Opening Expense

$

-

$

-

$

-

$

20

$

20


Total days closed for remodels


-


-


-


3


3

 

Bob Evans Restaurants same-store sales analysis (18-month core; 554 restaurants):






















Fiscal 2014


Fiscal 2013


Fiscal 2012



Nominal


Menu


Real


Nominal


Menu


Real


Nominal


Menu


Real

May


(0.9)


3.0


(3.9)


0.7


2.2


(1.5)


(1.5)


0.8


(2.3)

June


0.3


3.0


(2.7)


(0.3)


1.9


(2.2)


(2.0)


1.0


(3.0)

July


(1.0)


3.8


(4.8)


2.3


0.9


1.4


(1.8)


2.0


(3.8)

Q1


(0.6)


3.3


(3.9)


1.0


1.6


(0.6)


(1.8)


1.3


(3.1)




















August


(0.7)


4.2


(4.9)


1.5


0.9


0.6


(2.6)


2.0


(4.6)

September


(2.0)


3.8


(5.8)


(0.4)


1.4


(1.9)


(1.9)


2.0


(3.9)

October


(2.9)


2.2


(5.0)


1.6


3.1


(1.5)


(0.3)


2.0


(2.3)

Q2


(1.9)


3.3


(5.2)


1.0


1.9


(0.9)


(1.5)


2.0


(3.5)




















November


-


-


-


2.1


2.8


(0.7)


0.1


1.9


(1.8)

December


-


-


-


(0.5)


2.7


(3.2)


2.4


2.2


0.2

January


-


-


-


3.1


2.7


0.4


2.3


2.0


0.3

Q3


-


-


-


1.6


2.8


(1.2)


1.6


2.0


(0.4)




















February


-


-


-


(4.0)


3.1


(7.1)


2.2


1.7


0.5

March


-


-


-


3.6


3.5


0.1


(2.0)


1.7


(3.7)

April


-


-


-


1.7


3.4


(1.7)


(1.5)


1.8


(3.3)

Q4


-


-


-


0.5


3.4


(2.8)


(0.6)


1.7


(2.3)




















Fiscal year


(1.3)


3.3


(4.5)


1.0


2.4


(1.4)


(0.6)


1.7


(2.3)

 


• Key restaurant sales data (core restaurants only):











Bob Evans

Restaurants







Average annual store sales ($) – FY13


$ 1,741,000







Q2 FY 2014 day part mix (%):





Breakfast


33%



Lunch


37%



Dinner


30%







Q2 FY 2014 dine-in check average per guest ($):





Breakfast


$ 8.82



Lunch


9.33



Dinner


9.42







Q2 FY 2014 dine-in check average per guest ($)


$ 9.18







Q2 FY 2014 dine-in check average per ticket ($)


$ 17.98







Q2 FY 2014 carry-out check average per ticket ($)


$ 14.54

BEF Foods historical sow cost review (average cost per hundredweight):

















Fiscal Year



Q1



Q2



Q3



Q4



Average

2014


$

63.24


$

77.33


$



$



$

70.79

2013


$

54.19


$

43.22


$

58.72


$

59.07


$

53.87

2012


$

57.06


$

67.82


$

60.56


$

60.41


$

61.58

2011


$

59.52


$

60.47


$

51.16


$

59.05


$

57.17

















 Total pounds sold review:

















Fiscal Year



Q1



Q2



Q3



Q4



Average

2014



13.0%



0.2%









6.0%

2013



7.2%



16.1%



13.1%



21.4%



14.6%

2012



-2.7%



3.1%



0.9%



-1.3%



0.1%

2011



-1.1%



-14.7%



-7.9%



-4.6%



-7.1%

















Total pounds sold, by category:

















Fiscal Year 2014:






























Category



Q1



Q2



Q3



Q4




Sausage



22.3%



23.5%










Sides



39.4%



40.2%










Frozen



5.0%



5.1%










Food Service



29.7%



27.5%










Other



3.6%



3.7%


























Fiscal Year 2013:






























Category



Q1



Q2



Q3



Q4




Sausage



24.2%



24.2%



25.5%



22.0%




Sides



39.5%



37.8%



39.7%



38.7%




Frozen



5.7%



5.3%



4.2%



5.5%




Food Service



26.9%



30.0%



28.0%



30.5%




Other



3.7%



2.7%



2.6%



3.4%




















 

Net sales review (dollars in thousands):




















Q2 2014


YTD 2014



Q2 2013


YTD 2013

Gross sales

$

104,244

$

199,498


$

97,239

$

180,155











Less: promotions


(11,617)


(21,278)



(12,101)


(19,060)











Less: returns and slotting


(527)


(1,222)



(1,885)


(2,367)











Net sales

$

92,100

$

176,998


$

83,253

$

158,728

SOURCE Bob Evans Farms, Inc.

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