Bob Evans Farms, Inc.
Dec 2, 2014

Bob Evans Reports Fiscal 2015 Second-Quarter Results

NEW ALBANY, Ohio, Dec. 2, 2014 (GLOBE NEWSWIRE) -- Bob Evans Farms, Inc. (Nasdaq:BOBE) today announced its financial results for the fiscal 2015 second quarter ended Friday, October 24, 2014. On a GAAP basis, the Company reported net income of $6.0 million, or $0.25 per diluted share, compared with net income of $6.1 million, or $0.23 per diluted share, in the comparable period last year. On an adjusted basis(1), net income was $8.6 million, or $0.36 per diluted share, compared with net income of $9.5 million, or $0.35 per diluted share, in the comparable period last year.

Second-quarter fiscal 2015 commentary

Chief Executive Officer Steve Davis said, "Performance at Bob Evans Restaurants and BEF Foods continues to improve as we leverage the recent multi-year investment programs in both businesses. At Bob Evans Restaurants, 'Carryout Acceleration' and 'Own Our Nights' are two key programs paving the way for successful introduction of the Broasted Chicken platform as well as for an improved guest experience and sales trends overall. These programs are not only improving execution in the parts of the business most relevant to the Broasted Chicken rollout; they are driving performance across the entire system where our Sweet and Stacked breakfast offerings and Slow-Roasted lunch and dinner platforms continue to perform well. As we have noted previously, Broasted Chicken is one of several initiatives expected to drive positive same-store sales. Our Slow-Roasted and Sweet and Stacked platforms are also vital elements of our menu innovation program.  

"At Bob Evans Restaurants, the Broasted Chicken platform rollout continues to leverage the Farm Fresh Refresh program's positive impact on our dine-in and off-premise capabilities. The new platform drove meaningful same-store sales growth during the lunch and dinner day parts with second quarter same-store sales outperformance of 130 and 690 basis points at lunch and dinner, respectively, compared to restaurants that have not yet introduced the platform. Off-premise same-store sales increased 21.3 percent in restaurants offering Broasted Chicken, while off-premise same-store sales at all other locations grew 10.7 percent."

Davis continued, "At BEF Foods, we are well positioned to meet our customers' needs during the peak holiday selling season. We are also continuing our efforts to improve the operating efficiency of our plants. Our $1.6 million year-to-date investment in outside consulting services to drive plant operating efficiency gains subsequent to our recent plant expansions has paid off as operating inefficiencies were reduced to $1.3 million during the second quarter, a $1.0 million improvement from the first quarter.

"We expect BEF Food's margins to improve during the third and fourth quarters as the Company leverages lower forecasted sow costs, and increased expected plant efficiency with increased sales volume. While we have modestly lowered our sow cost guidance to reflect recent sow cost trends, we remain cautious with our pricing and trade spending strategies. Trade spending was reduced $1.3 million during the first half of the fiscal year to enable strategic incremental trade expenditures during the remainder of the year to capture volume through increased advertising and other trade expenditures.

"We are also working with leading global professional services firms to assist us in developing sustainable productivity and operating cost improvements to achieve our 300 to 350 basis point long-term operating margin improvement goal by fiscal 2018. In addition, we have retained Deloitte to complete a comprehensive review of the Company's S,G&A structure. We believe there are meaningful opportunities to improve our cost structure and enhance performance at all levels. Working with independent experts enables us to drill down and accelerate the process. Furthermore, as part of our focus on cost efficiencies, the Company is exiting its interest in a private aircraft.

"Finally, the Finance Committee of the Board, three of whose five members were newly elected to the Board at the 2014 annual meeting and all of whom are independent, is engaged in a fresh, comprehensive review of the Company's strategic, financial and capital allocation plans, including ideas that have been proposed by the Company's stockholders. To assist in the process, the Committee has unanimously determined to engage Lazard to serve as independent financial advisor. The Board, external advisors and management are aligned and working cooperatively together to drive shareholder value and achieve our current-year and long-term earnings objectives."  

Second-quarter fiscal 2015 Bob Evans Restaurants segment summary

Bob Evans Restaurants' net sales were $241.2 million, an increase of $0.7 million, or 0.3 percent, compared to net sales of $240.5 million in the corresponding period last year. Same-store sales were flat in the quarter, slightly trailing the national Knapp-Track™ family dining index increase of 0.3 percent. In Bob Evans Restaurants' top three Knapp-Track™ regions - East North Central, South Atlantic, and Mid-Atlantic - which comprise 82 percent of the chain as measured by restaurant count, same-store sales results outperformed the regional Knapp-Track™ family dining indices by 10 to 180 basis points.

 
 Same-Store Sales
(SSS) Restaurants
 
August
 
September
 
October
 
2Q FY '15
 3Q
(QTD: 11-27-14)
557 -2.5% 1.8% 0.4% 0.0% 2.7%
 
Second-quarter Fiscal 2015 SSS% Day Part Performance - Total Chain
Day Part On-Premise Off-Premise Total
Breakfast -1.4% 13.7% -0.3%
Lunch -1.4% 14.0% 0.1%
Dinner -2.6% 13.0% 0.1%
Total -1.7% 13.5% 0.0%
 
Second-quarter Fiscal 2015 SSS% Day Part Performance - Restaurants offering Broasted Chicken
Day Part On-Premise Off-Premise Total
Breakfast -3.2% 11.7% -1.7%
Lunch -1.8% 22.3% 1.2%
Dinner 0.3% 24.4% 5.5%
Total -1.6% 21.3% 1.8%
 
Second-quarter Fiscal 2015 SSS% Day Part Performance- Restaurants without Broasted Chicken
Day Part On-Premise Off-Premise Total
Breakfast -1.0% 14.3% 0.0%
Lunch -1.2% 11.1% -0.1%
Dinner -3.3% 8.7% -1.4%
Total -1.8% 10.7% -0.5%

Bob Evans Restaurants' non-GAAP operating income was $9.6 million, compared to non-GAAP operating income of $13.6 million in the corresponding period last year. The primary drivers of the $4.0 million decline were: a $4.1 million negative impact of higher food costs, with approximately $3.6 million attributable to menu mix and increased commodity costs, with the remainder primarily attributable to discounted sales; a $0.6 million negative impact of operating expense associated primarily with increased service contract expenses; partially offset by approximately $1.3 million of labor cost favorability due to the Company's ongoing efforts to optimize restaurant staffing through its workforce management process, although $0.9 million of incremental training and labor costs associated with the Broasted Chicken platform rollout and Carryout Acceleration programs resulted in a net labor benefit of $0.4 million; and approximately $0.3 million of sales leverage.

Second-quarter fiscal 2015 BEF Foods segment summary

BEF Foods' net sales were $92.1 million, flat compared to the prior year period as a 9.0 percent increase in side-dish volume was offset by lower sausage sales. $3.0 million of increased sausage pricing and $0.3 million of reduced trade spending was offset by a 4.5 percent decline in total pounds sold resulting primarily from a 16.4 percent decline in sausage pounds sold that was partially offset by the side-dish volume growth. Adjusting for the sale of the Company's Irvine, California, production facility during the second quarter of fiscal 2014, net sales would have increased 1.6 percent on a dollar basis, and volume would have declined 1.6 percent.

BEF Foods' non-GAAP operating income was $3.2 million, compared to non-GAAP operating income of $0.6 million in the corresponding period last year. The primary drivers of the $2.6 million increase were: $2.5 million of favorability resulting primarily from lower advertising expenses and reduced headcount; $1.9 million of cost of goods sold favorability resulting from the effect of a higher sales mix of non-sausage products net of increased sow and trim costs ($0.8 million) and increased freight-in costs to plants; $0.2 million of other operating expense favorability from reduced insurance costs and repair and maintenance expenses; partially offset by $1.1 million of incremental depreciation as a result of plant expansions in the prior year, and $0.8 million of increased labor costs also related to the plant expansions.

Net interest expense - The Company's non-GAAP net interest expense was $2.7 million in the second quarter of fiscal 2015, an increase of $2.1 million, compared to $0.6 million in the corresponding period last year. The year-over-year increase was due to borrowing related to funding of share repurchases and capital expenditures in the second half of fiscal 2014. The borrowing rate on the Company's outstanding debt was 2.16 percent at the end of the second quarter, compared to 1.43 percent at the end of the comparable prior year period.

Taxes - The provision for income taxes is based on a current estimate of the annual effective income tax rate adjusted to reflect the impact of discrete items. The Company's effective income tax rate was 11.3 percent for the quarter, as compared to 28.6 percent for the corresponding period a year ago. The decrease in the tax rate was driven primarily by an increase in the domestic production activities deduction, benefits from a Company owned life insurance policy recorded in the second quarter, and discrete items related to prior year Work Opportunity Tax Credits, state refunds received, and other items. For non-GAAP items, the tax rate was 26.1 percent, reflecting the Company's annual estimated tax rate.

Balance sheet highlights - The Company's cash balance and revolver borrowings at the end of the second quarter of fiscal 2015 were $3.7 million and $465.0 million, respectively. The Company was in compliance with its debt covenants at the end of the second quarter of fiscal 2015. The Company's leverage ratio as defined in its credit agreement was 3.81 at the end of the quarter, up from 3.69 in the prior quarter.

Fiscal year 2015 commentary and outlook

"We are narrowing our fiscal 2015 diluted EPS guidance range to $1.90 to $2.10. Bob Evans Restaurants' same-store sales guidance reflects an extended roll-out schedule for the Broasted Chicken platform to ensure continued strong operational execution and prudent management of implementation expenses. From a development perspective, we expect to open a total of 7 Bob Evans Restaurant locations, and up to 10 Bob Evans Express locations, during fiscal 2015. Food costs are expected to rise 60 to 80 basis points during the second half of fiscal 2015 compared to the prior year due to increased commodity prices and continued off-premise sales mix growth. We also expect continuation of increased health care costs during the second half of fiscal 2015. Offsetting these factors, third and fourth quarter sow cost guidance has been reduced to $73 to $78 per hundredweight, from $80 to $90 per hundredweight, and our full fiscal year estimate is now $78 to $82 per hundredweight, reflecting recent sow cost trends and current predictions from our supply chain experts. Our expected depreciation expense and tax rate assumptions have also been reduced for fiscal 2015, and we continue to focus on reducing our tax rate through effective tax planning strategies.

"We also recently committed to a plan to sell our ownership interest in an aircraft jointly owned with the Greif Corporation. The sale is expected to be completed prior to the end of the current fiscal year and may result in a loss on disposal of $1.7 to $2.2 million. Finally, we expect to spend approximately $2 million during the second half of fiscal 2015 for services provided by advisory firms to review strategic initiatives, and assist in driving sustainable productivity improvements and cost efficiencies," said Chief Financial Officer Mark Hood. 

Summary of performance drivers: fiscal 2015 guidance versus fiscal 2014
 
 
 
1Q (actual)
 
2Q (actual)
 
3Q
 
4Q 
Full
Year
sss% 2015 (guidance) -2.0% 0.0% mid-single
digit
mid-single
digit
1.5% to 2.5%
sss% 2014 (actual) -0.6% -1.9% -1.8% -4.1% -2.1%
sow costs (per hundredweight) 2015 (guidance) $87.87 $78.82 $73 to $78 $73 to $78 $78 to $82
sow costs (per hundredweight) 2014 (actual) $63.24 $77.33 $72.36 $78.47 $73.23
estimated Broasted Chicken rollout
(% of restaurants)
6% 39% 45% 55% Note: 100%
expected
2Q FY'16
 
Guidance Metric FY '15
Consolidated net sales $1.35 to $1.37 billion
Bob Evans Restaurants same-store sales 1.5 to 2.5 percent
BEF Foods net sales $388 to $398 million
Capital expenditures $80 to $85 million
ERP implementation (included in S,G&A) $3.5 to $4.5 million
Depreciation and amortization $81 to $85 million
Net interest expense $9.5 to $10.5 million
Tax rate 20 to 22 percent
Diluted weighted-average share count 23.8 million shares
Adjusted earnings per diluted share $1.90 to $2.10

This outlook is subject to a number of factors beyond the Company's control, including the risk factors discussed in the Company's fiscal 2014 annual report on Form 10‑K and its other subsequent filings with the Securities and Exchange Commission.

Investor Conference Call

The Company will host a conference call to discuss its second-quarter fiscal 2015 results at 10 a.m. (ET) on Wednesday, December 3, 2014. The dial-in number is (855) 468-0551, access code 34994177. A replay will be available at (800) 585-8367, access code 34994177.

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

(1)Non-GAAP Financial Measures

The Company uses non-GAAP financial measures to monitor and evaluate the ongoing performance of the Company. The Company believes the additional measures are useful to investors for financial analysis. 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. Reconciliations to the applicable GAAP financial measures are included in the attached schedules.

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 25, 2014, 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.

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 24, 2014), Bob Evans Restaurants owned and operated 562 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.

Broasted is a registered trademark of The Broaster Company, LLC.

BOBE-E

Bob Evans Farms, Inc.
Earnings Release Fact Sheet (unaudited)
Fiscal 2015 - Quarter 2
Note: amounts are in thousands, except per share amounts
Second quarter Fiscal 2015, three months ended October 24, 2014, compared to the corresponding period a year ago:
             
      Basic EPS Diluted EPS
  Three Months Ended Three Months Ended Three Months Ended
  Oct 24, 2014 Oct 25, 2013 Oct 24, 2014 Oct 25, 2013 Oct 24, 2014 Oct 25, 2013
Operating Income (Loss) as Reported            
Bob Evans Restaurants 6,712 11,912        
BEF Foods 2,300 (3,017)        
Total operating income from continuing operations 9,012 8,895        
Net interest expense 2,203 140        
Per-tax Income from continuing operations 6,809 8,755        
Expense for income taxes 770 2,502        
Income from continuing operations as reported 6,039 6,253  $ 0.26  $ 0.23  $ 0.25  $ 0.23
             
Total operating and pre-tax loss from discontinued operations (180)        
Income tax benefit (46)        
Loss from discontinued operations as reported (134)
Net income as reported 6,039 6,119 $0.26 $0.23 $0.25 $0.23
             
Adjustments            
Bob Evans Restaurants            
Impairments including from Assets Held for Sale 1,955        
Severance/Restructuring 1,348        
Loss (Gain) on Sale of Assets (1,214)        
Activism and Other 2,933 (422)        
  2,933 1,667        
             
BEF Foods            
Impairments including from Assets Held for Sale   3,000        
Severance/Restructuring 766        
Loss on Sale of Assets (112)        
Activism and Other 946        
  946 3,654        
             
Discontinued Operations            
Adjustment to discontinued operations 180        
  180        
             
Total adjustments            
Impairments including from Assets Held for Sale 4,955        
Severance/Restructuring 2,114        
Loss (Gain) on Sale of Assets (1,326)        
Activism and Other 3,879 (422)        
Adjustment to discontinued operations 180        
  3,879 5,501        
             
Non-GAAP operating income from continuing operations            
Bob Evans Restaurants 9,645 13,579        
BEF Foods 3,246 637        
Total non-GAAP operating income 12,891 14,216        
             
Continuing Operations            
Adjustments to net interest expense 458 419        
Non-GAAP net interest expense 2,661 559        
Non-GAAP pre-tax income from continuing operations 10,230 13,657        
Adjustments to income tax provision 835 1,650        
Non-GAAP income tax provision 1,605 4,152        
Non-GAAP net income from continuing operations 8,625 9,505  $ 0.37  $ 0.35  $ 0.36  $ 0.35
             
Discontinued Operations            
Adjustments to income tax benefit 56        
Non-GAAP income tax provision 10        
Non-GAAP loss from discontinued operations (10)
Non-GAAP net income 8,625 9,495  $ 0.37  $ 0.35  $ 0.36  $ 0.35
             
Shares Outstanding     23,509 27,086 23,735 27,184
 
 
Second quarter Fiscal 2015, six months ended October 24, 2014, compared to the corresponding period a year ago:
             
      Basic EPS Diluted EPS
  Six Months Ended Six Months Ended Six Months Ended
  Oct 24, 2014 Oct 25, 2013 Oct 24, 2014 Oct 25, 2013 Oct 24, 2014 Oct 25, 2013
Operating Income (Loss) as Reported            
Bob Evans Restaurants 8,427 18,394        
BEF Foods 649 2,500        
Total operating income from continuing operations 9,076 20,894        
Net interest expense (income) 3,819 (16)        
Per-tax Income from continuing operations 5,257 20,910        
Expense for income taxes 234 6,281        
Income from continuing operations as reported 5,023 14,629  $ 0.21  $ 0.54  $ 0.21  $ 0.53
             
Total operating and pre-tax loss from discontinued operations (180)        
Income tax benefit (46)        
Loss from discontinued operations as reported (134)
Net income as reported 5,023 14,495 $0.21 $0.53 $0.21 $0.53
             
Adjustments            
Bob Evans Restaurants            
Impairments including from Assets Held for Sale 1,577 11,743        
Severance/Restructuring 285 760        
Loss (Gain) on Sale of Assets 105 (1,300)        
Activism and Other 4,765 (15)        
  6,732 11,188        
             
BEF Foods            
Impairments including from Assets Held for Sale 3,000        
Severance/Restructuring 664 1,767        
Loss on Sale of Assets 13 52        
Activism and Other 1,500 23        
  2,177 4,842        
             
Discontinued Operations            
Adjustment to discontinued operations 180        
  180        
             
Total adjustments            
Impairments including from Assets Held for Sale 1,577 14,743        
Severance/Restructuring 949 2,527        
Loss (Gain) on Sale of Assets 118 (1,248)        
Activism and Other 6,265 8        
Adjustment to discontinued operations 180        
  8,909 16,210        
             
Non-GAAP operating income from continuing operations            
Bob Evans Restaurants 15,159 29,582        
BEF Foods 2,826 7,342        
Total non-GAAP operating income 17,985 36,924        
             
Continuing Operations            
Adjustments to net interest expense 903 1,081        
Non-GAAP net interest expense 4,722 1,065        
Non-GAAP pre-tax income from continuing operations 13,263 35,859        
Adjustments to income tax provision 2,094 4,865        
Non-GAAP income tax provision 2,328 11,146        
Non-GAAP net income from continuing operations 10,935 24,713  $ 0.47  $ 0.91  $ 0.46  $ 0.90
             
Discontinued Operations            
Adjustments to income tax benefit 56        
Non-GAAP income tax provision 10        
Non-GAAP loss from discontinued operations (10)
Non-GAAP net income 10,935 24,703  $ 0.47  $ 0.91  $ 0.46  $ 0.90
             
Shares Outstanding     23,467 27,287 23,698 27,402
 
 
Second quarter Fiscal 2015, three months ended October 24, 2014, compared to the corresponding period a year ago:
(Note that the prior year excludes discontinued operations)
                 
  Consolidated Results Bob Evans Restaurants
  Three Months Ended Three Months Ended
  Oct 24, 2014 % of Sales Oct 25, 2013 % of Sales Oct 24, 2014 % of Sales Oct 25, 2013 % of Sales
                 
Operating income as reported                
                 
Net sales 333,279   332,600   241,151   240,500  
Cost of sales 116,012 34.8% 113,605 34.2% 64,165 26.6% 59,921 24.9%
Operating wage and fringe benefit expenses 102,785 30.8% 101,971 30.7% 92,006 38.2% 91,954 38.2%
Other operating expenses 49,973 15.0% 49,460 14.9% 42,702 17.7% 42,013 17.5%
Selling, general and administrative expenses 36,022 10.8% 36,617 11.0% 20,777 8.6% 19,213 8.0%
Depreciation and amortization expense 19,475 5.8% 18,281 5.5% 14,789 6.1% 14,716 6.1%
Impairment of assets held for sale —% 3,771 1.1% —% 771 0.3%
Total as Reported 9,012 2.7% 8,895 2.7% 6,712 2.8% 11,912 5.0%
                 
Adjustments                
                 
Net sales        
Cost of sales        
Operating wage and fringe benefit expenses (15)   453   (15)   453  
Other operating expenses (115)     (115)    
Selling, general and administrative expenses (3,749)   (2,003)   (2,803)   (1,349)  
Depreciation and amortization expense        
Impairment of assets held for sale   (3,771)     (771)  
Total adjustments 3,879   5,321   2,933   1,667  
                 
Non-GAAP operating income                
                 
Net sales 333,279   332,600   241,151   240,500  
Cost of sales 116,012 34.8% 113,605 34.2% 64,165 26.6% 59,921 24.9%
Operating wage and fringe benefit expenses 102,770 30.8% 102,424 30.8% 91,991 38.1% 92,407 38.4%
Other operating expenses 49,858 15.0% 49,460 14.9% 42,587 17.7% 42,013 17.5%
Selling, general and administrative expenses 32,273 9.7% 34,614 10.4% 17,974 7.5% 17,864 7.4%
Depreciation and amortization expense 19,475 5.8% 18,281 5.5% 14,789 6.1% 14,716 6.1%
Impairment of assets held for sale —% —% —% —%
Total non-GAAP operating income 12,891 3.9% 14,216 4.3% 9,645 4.0% 13,579 5.6%
   
   
  BEF Foods
  Three Months Ended
  Oct 24, 2014 % of Sales Oct 25, 2013 % of Sales
         
Operating income as reported        
         
Net sales 92,128   92,100  
Cost of sales 51,847 56.3% 53,684 58.3%
Operating wage and fringe benefit expenses 10,779 11.7% 10,017 10.9%
Other operating expenses 7,271 7.9% 7,447 8.1%
Selling, general and administrative expenses 15,245 16.5% 17,404 18.9%
Depreciation and amortization expense 4,686 5.1% 3,565 3.9%
Impairment of assets held for sale —% 3,000 3.3%
Total as Reported 2,300 2.5% (3,017) (3.3)%
         
Adjustments        
         
Net sales    
Cost of sales    
Operating wage and fringe benefit expenses    
Other operating expenses    
Selling, general and administrative expenses (946)   (654)  
Depreciation and amortization expense    
Impairment of assets held for sale   (3,000)  
Total adjustments 946   3,654  
         
Non-GAAP operating income        
         
Net sales 92,128   92,100  
Cost of sales 51,847 56.3% 53,684 58.3%
Operating wage and fringe benefit expenses 10,779 11.7% 10,017 10.9%
Other operating expenses 7,271 7.9% 7,447 8.1%
Selling, general and administrative expenses 14,299 15.5% 16,750 18.2%
Depreciation and amortization expense 4,686 5.1% 3,565 3.9%
Impairment of assets held for sale —% —%
Total non-GAAP operating income 3,246 3.5% 637 0.7%
 
 
Second quarter Fiscal 2015, six months ended October 24, 2014, compared to the corresponding period a year ago:
(Note that the prior year excludes discontinued operations)
                 
  Consolidated Results Bob Evans Restaurants
  Six Months Ended Six Months Ended
  Oct 24, 2014 % of Sales Oct 25, 2013 % of Sales Oct 24, 2014 % of Sales Oct 25, 2013 % of Sales
                 
Operating income as reported                
                 
Net sales 659,619   662,049   481,302   485,051  
Cost of sales 229,475 34.8% 220,246 33.3% 127,376 26.5% 122,574 25.3%
Operating wage and fringe benefit expenses 207,214 31.4% 204,817 30.9% 186,847 38.8% 185,175 38.2%
Other operating expenses 99,481 15.1% 98,382 14.9% 85,207 17.7% 83,326 17.2%
Selling, general and administrative expenses 74,667 11.3% 69,819 10.5% 43,057 8.9% 37,295 7.7%
Depreciation and amortization expense 39,448 6.0% 35,511 5.4% 30,130 6.3% 28,907 6.0%
Impairment of assets held for sale 258 —% 12,380 1.9% 258 0.1% 9,380 1.9%
Total as Reported 9,076 1.4% 20,894 3.2% 8,427 1.8% 18,394 3.8%
                 
Adjustments                
                 
Net sales        
Cost of sales        
Operating wage and fringe benefit expenses (29)   453   (29)   453  
Other operating expenses (262)   33   (262)    
Selling, general and administrative expenses (8,360)   (4,187)   (6,183)   (2,312)  
Depreciation and amortization expense   51     51  
Impairment of assets held for sale (258)   (12,380)   (258)   (9,380)  
Total adjustments 8,909   16,030   6,732   11,188  
                 
Non-GAAP operating income                
                 
Net sales 659,619   662,049   481,302   485,051  
Cost of sales 229,475 34.8% 220,246 33.3% 127,376 26.5% 122,574 25.3%
Operating wage and fringe benefit expenses 207,185 31.4% 205,270 31.0% 186,818 38.8% 185,628 38.3%
Other operating expenses 99,219 15.0% 98,415 14.9% 84,945 17.6% 83,326 17.2%
Selling, general and administrative expenses 66,307 10.1% 65,632 9.9% 36,874 7.7% 34,983 7.2%
Depreciation and amortization expense 39,448 6.0% 35,562 5.4% 30,130 6.3% 28,958 6.0%
Impairment of assets held for sale —% —% —% —%
Total non-GAAP operating income 17,985 2.7% 36,924 5.6% 15,159 3.1% 29,582 6.1%
   
   
  BEF Foods
  Six Months Ended
  Oct 24, 2014 % of Sales Oct 25, 2013 % of Sales
         
Operating income as reported        
         
Net sales 178,317   176,998  
Cost of sales 102,099 57.3% 97,672 55.2%
Operating wage and fringe benefit expenses 20,367 11.4% 19,642 11.1%
Other operating expenses 14,274 8.0% 15,056 8.5%
Selling, general and administrative expenses 31,610 17.7% 32,524 18.4%
Depreciation and amortization expense 9,318 5.2% 6,604 3.7%
Impairment of assets held for sale —% 3,000 1.7%
Total as Reported 649 0.4% 2,500 1.4%
         
Adjustments        
         
Net sales    
Cost of sales    
Operating wage and fringe benefit expenses    
Other operating expenses   33  
Selling, general and administrative expenses (2,177)   (1,875)  
Depreciation and amortization expense    
Impairment of assets held for sale   (3,000)  
Total adjustments 2,177   4,842  
         
Non-GAAP operating income        
         
Net sales 178,317   176,998  
Cost of sales 102,099 57.3% 97,672 55.2%
Operating wage and fringe benefit expenses 20,367 11.4% 19,642 11.1%
Other operating expenses 14,274 8.0% 15,089 8.5%
Selling, general and administrative expenses 29,433 16.5% 30,649 17.3%
Depreciation and amortization expense 9,318 5.2% 6,604 3.7%
Impairment of assets held for sale —% —%
Total non-GAAP operating income 2,826 1.6% 7,342 4.1%
   
   
  Consolidated Results
  Three Months Ended
  October 24, 2014 % of sales October 25, 2013 % of sales
      (as adjusted) (as adjusted)
Net sales  $ 333,279    $ 332,600  
Cost of sales 116,012 34.8% 113,605 34.2%
Operating wage and fringe benefit expenses 102,785 30.8% 101,971 30.7%
Other operating expenses 49,973 15.0% 49,460 14.9%
Selling, general and administrative expenses 36,022 10.8% 36,617 11.0%
Depreciation and amortization expense 19,475 5.8% 18,281 5.5%
Impairment of assets held for sale —% 3,771 1.1%
Operating income 9,012 2.7% 8,895 2.7%
Net interest expense (income) 2,203 0.7% 140 —%
(Loss) income before income taxes 6,809 2.0% 8,755 2.6%
(Benefit) provision for income taxes 770 0.2% 2,502 0.8%
(Loss) income from continuing operations 6,039 1.8% 6,253 1.9%
Loss from discontinued operations, net of income taxes —% (134) —%
Net loss (income)  $ 6,039 1.8%  $ 6,119 1.8%
         
Earnings per share - Net (loss) income        
Basic  $ 0.26    $ 0.23  
Diluted  $ 0.25    $ 0.23  
         
Cash dividends paid per share  $ 0.310    $ 0.310  
         
Weighted average shares outstanding        
Basic 23,509   27,086  
Dilutive Shares 226   98  
Diluted 23,735   27,184  
         
Shares outstanding at quarter end 23,600   26,463  

The number of dilutive shares outstanding at October 24, 2014 that were not included in the computation of dilutive earnings per share, because to do so would have been antidilutive, were 42,354 shares for the three months ended October 24, 2014.

Income taxes related to continuing operations, as a percentage of pre-tax income, were 11.3% vs 28.6%.

  Three Months Ended
  Bob Evans Restaurants BEF Foods
  October 24, 2014 October 25, 2013 October 24, 2014 October 25, 2013
                 
Net sales  $ 241,151    $ 240,500    $ 92,128    $ 92,100  
Cost of sales 64,165 26.6% 59,921 24.9% 51,847 56.3% 53,684 58.3%
Operating wage and fringe benefit expenses 92,006 38.2% 91,954 38.2% 10,779 11.7% 10,017 10.9%
Other operating expenses 42,702 17.7% 42,013 17.5% 7,271 7.9% 7,447 8.1%
Selling, general and administrative expenses 20,777 8.6% 19,213 8.0% 15,245 16.5% 17,404 18.9%
Depreciation and amortization expense 14,789 6.1% 14,716 6.1% 4,686 5.1% 3,565 3.9%
Impairment of assets held for sale —% 771 0.3% —% 3,000 3.3%
Operating income (loss)  $ 6,712 2.8%  $ 11,912 5.0%  $ 2,300 2.5%  $ (3,017) (3.3)%
   
   
  Consolidated Results
  Six Months Ended
  October 24, 2014 % of sales October 25, 2013 % of sales
      (as adjusted) (as adjusted)
Net sales  $ 659,619    $ 662,049  
Cost of sales 229,475 34.8% 220,246 33.3%
Operating wage and fringe benefit expenses 207,214 31.4% 204,817 30.9%
Other operating expenses 99,481 15.1% 98,382 14.9%
Selling, general and administrative expenses 74,667 11.3% 69,819 10.5%
Depreciation and amortization expense 39,448 6.0% 35,511 5.4%
Impairment of assets held for sale 258 —% 12,380 1.9%
Operating income 9,076 1.4% 20,894 3.2%
Net interest expense (income) 3,819 0.6% (16) —%
(Loss) income before income taxes 5,257 0.8% 20,910 3.2%
(Benefit) provision for income taxes 234 —% 6,281 0.9%
(Loss) income from continuing operations 5,023 0.8% 14,629 2.2%
Loss from discontinued operations, net of income taxes —% (134) —%
Net loss (income) $ 5,023 0.8% $ 14,495 2.2%
         
Earnings per share - Net (loss) income        
Basic  $ 0.21    $ 0.53  
Diluted  $ 0.21    $ 0.53  
         
Cash dividends paid per share  $ 0.620    $ 0.585  
         
Weighted average shares outstanding        
Basic 23,467   27,287  
Dilutive Shares 231   115  
Diluted 23,698   27,402  
         
Shares outstanding at quarter end 23,600   26,463  

The number of dilutive shares outstanding at October 24, 2014 that were not included in the computation of dilutive earnings per share, because to do so would have been antidilutive, were 43,953 shares for the six months ended October 24, 2014.

Income taxes related to continuing operations, as a percentage of pre-tax income, were 4.5% vs 30.0%.

  Six Months Ended
  Bob Evans Restaurants BEF Foods
  October 24, 2014 October 25, 2013 October 24, 2014 October 25, 2013
                 
Net sales $ 481,302   $ 485,051   $ 178,317   $ 176,998  
Cost of sales 127,376 26.5% 122,574 25.3% 102,099 57.3% 97,672 55.2%
Operating wage and fringe benefit expenses 186,847 38.8% 185,175 38.2% 20,367 11.4% 19,642 11.1%
Other operating expenses 85,207 17.7% 83,326 17.2% 14,274 8.0% 15,056 8.5%
Selling, general and administrative expenses 43,057 8.9% 37,295 7.7% 31,610 17.7% 32,524 18.4%
Depreciation and amortization expense 30,130 6.3% 28,907 6.0% 9,318 5.2% 6,604 3.7%
Impairment of assets held for sale 258 0.1% 9,380 1.9% —% 3,000 1.7%
Operating income (loss) $ 8,427 1.8% $ 18,394 3.8% $ 649 0.4% $ 2,500 1.4%

Consolidated Balance Sheets

  (in thousands)
  Unaudited  
  October 24, 2014 April 25, 2014
Assets
Current Assets    
Cash and equivalents  $ 3,737  $ 7,826
Accounts receivable, net 30,582 30,688
Inventories 27,977 25,243
Deferred income taxes 18,656 18,656
Federal and state income tax receivables 25,133 25,824
Prepaid expenses 5,599 4,281
Current assets held for sale 5,221 3,308
Total Current Assets 116,905 115,826
Property, Plant and Equipment 1,620,776 1,588,790
Less accumulated depreciation 749,650 715,867
Net Property, Plant and Equipment 871,126 872,923
Other Assets    
Deposits and other 4,543 3,442
Long-term note receivable 17,366 16,243
Long-term investments 33,275 31,972
Goodwill 19,634 19,634
Other intangible assets 3,192 3,270
Long-term assets held for sale 2,251
Total Other Assets 78,010 76,812
Total Assets  $ 1,066,041  $ 1,065,561
Liabilities and Stockholders' Equity
Current Liabilities    
Credit facility borrowings $ —  $ 458,898
Current portion of long-term debt 369
Accounts payable 32,901 29,064
Accrued property, plant and equipment purchases 8,430 5,841
Accrued non-income taxes 15,111 17,843
Accrued wages and related liabilities 19,974 21,574
Self-insurance 20,619 19,874
Deferred revenue 11,192 12,967
Other accrued expenses 31,055 33,024
Total Current Liabilities 139,651 599,085
Long-Term Liabilities    
Deferred compensation 39,727 35,731
Federal and state income taxes 4,895 4,959
Deferred income taxes 32,829 32,829
Deferred rent and other 6,560 6,534
Long-term debt 468,344 835
Total Long-Term Liabilities 552,355 80,888
Stockholders' Equity    
Common stock, $.01 par value; authorized 100,000 shares; issued 42,638 shares at October 24, 2014, and April 25, 2014 426 426
Capital in excess of par value 222,711 225,562
Retained earnings 840,039 849,619
Treasury stock, 19,038 shares at October 24, 2014, and 19,175 shares at April 25, 2014, at cost (689,141) (690,019)
Total Stockholders' Equity 374,035 385,588
Total Liabilities and Stockholders' Equity  $ 1,066,041  $ 1,065,561

Consolidated Statements of Cash Flows (unaudited)

  (in thousands)
  Six Months Ended
  October 24, 2014 October 25, 2013
    (as adjusted)
Operating activities:    
Net income  $ 5,023  $ 14,495
Less loss from discontinued operations 134
Income from continuing operations 5,023 14,629
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 39,448 35,511
Impairment of assets held for sale 258 12,380
(Gain) / Loss on disposal and impairment of held and used fixed assets 943 1,484
(Gain) on long-term investments (1,233) (777)
Deferred compensation 880 (1,066)
Stock based compensation 1,888 3,578
Accretion on long-term note receivable (903) (1,081)
Amortization of deferred financing costs 448 130
Cash provided by (used for) assets and liabilities:    
Accounts receivable 106 (3,713)
Inventories (2,734) 676
Prepaid expenses (1,318) (602)
Accounts payable 3,837 (1,193)
Federal and state income taxes 627 8,614
Accrued wages and related liabilities (1,600) (2,490)
Self-insurance 745 434
Accrued non-income taxes (2,732) 3,760
Deferred revenue (1,775) (1,891)
Other assets and liabilities (1,932) 2,696
Net cash provided by operating activities 39,976 71,079
Investing activities:    
Purchase of property, plant and equipment (36,955) (117,673)
Proceeds from sale of property, plant and equipment 1,108 5,638
Deposits and other (261) 5
Net cash used in investing activities (36,108) (112,030)
Financing activities:    
Cash dividends paid (14,603) (16,008)
Net increase in credit facility 6,138 116,794
Proceeds from long-term debt 3,000
Payments of debt issuance costs (1,279)
Principal payments on long-term debt (167)
Purchase of treasury stock (75,490)
Proceeds from issuance of stock awards and treasury stock 239 11,148
Cash paid for net shares settled (1,768) (2,306)
Excess tax benefits from stock-based compensation 483 2,651
Net cash (used in) provided by financing activities (7,957) 36,789
Net cash (used in) operations (4,089) (4,162)
Net cash (used in) operating activities of discontinued operations (134)
Net cash (used in) discontinued operations (134)
Cash and equivalents at the beginning of the period 7,826 9,010
Cash and equivalents at the end of the period  $ 3,737  $ 4,714

Bob Evans Restaurants openings and closings, by quarter

Future quarters represent estimates for fiscal 2015

Fiscal
Year
Beginning
Total
Q1 Q2 Q3 Q4 Full Year Closings Ending
Total
2015 561 1 4 2 7 568
2014 560 1 1 1 1 4 3 561
2013 565 2 2 7 560
2012 563 2 2 4 2 565
2011 569 2 2 8 563

Bob Evans Restaurants same-store sales analysis (18-month core; 557 restaurants)

  Fiscal 2015 Fiscal 2014 Fiscal 2013
  Total Pricing/Mix Traffic Total Pricing/Mix Traffic Total Pricing/Mix Traffic
May (1.6) 1.5 (3.1) (0.9) 3.0 (3.9) 0.7 2.2 (1.5)
June (2.0) 2.4 (4.4) 0.3 3.0 (2.7) (0.3) 1.9 (2.2)
July (2.3) 1.6 (3.9) (1.0) 3.8 (4.8) 2.3 0.9 1.4
Q1 (2.0) 1.8 (3.8) (0.6) 3.3 (3.9) 1.0 1.6 (0.6)
                   
August (2.5) 1.0 (3.5) (0.7) 4.2 (4.9) 1.5 0.9 0.6
September 1.8 1.0 0.8 (2.0) 3.8 (5.8) (0.4) 1.4 (1.9)
October 0.4 1.0 (0.6) (2.9) 2.2 (5.0) 1.6 3.1 (1.5)
Q2 0.0 1.1 (1.1) (1.9) 3.3 (5.2) 1.0 1.9 (0.9)
                   
November       0.4 2.2 (1.8) 2.1 2.8 (0.7)
December       (1.7) 2.2 (3.9) (0.5) 2.7 (3.2)
January       (4.7) 2.2 (6.9) 3.1 2.7 0.4
Q3       (1.8) 2.2 (3.9) 1.6 2.8 (1.2)
                   
February       (6.7) 1.9 (8.6) (4.0) 3.1 (7.1)
March       (3.6) 1.5 (5.1) 3.6 3.5 0.1
April       (2.7) 1.5 (4.2) 1.7 3.4 (1.7)
Q4       (4.1) 1.6 (5.8) 0.5 3.4 (2.8)
                   
Fiscal year (1.0) 1.5 (2.5) (2.1) 2.6 (4.7) 1.0 2.4 (1.4)

Bob Evans Restaurants key restaurant sales data (core restaurants only)

  Bob Evans Restaurants
Average annual store sales ($) - FY14  $ 1,706,000
Q2 FY2015 day part mix (%):  
Breakfast 33%
Lunch 37%
Dinner 30%
Q2 FY2015 dine-in check average per guest ($):  
Breakfast  $ 9.06
Lunch  $ 9.58
Dinner  $ 9.67
Q2 FY2015 dine-in check average per guest ($):  $ 9.43
Q2 FY2015 dine-in check average per ticket ($):  $ 18.38
Q2 FY2015 carry-out check average per ticket ($):  $ 15.18

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

Fiscal Year Q1 Q2 Q3 Q4 Average
2015  $ 87.87  $ 78.82      $ 83.03
2014  $ 63.24  $ 77.33  $ 72.36  $ 78.47  $ 73.23
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

BEF Foods total pounds sold review

Fiscal Year Q1 Q2 Q3 Q4 Average
2015 (6.1)% (4.5)%     (5.3)%
2014 13.0% 0.2% (11.1)% (6.9)% (2.4)%
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)%

BEF Foods total pounds sold, by category

Fiscal 2015        
         
Category Q1 Q2 Q3 Q4
Sausage 19.3% 20.5%    
Sides 42.0% 45.9%    
Frozen 4.6% 5.0%    
Food Service 30.0% 24.0%    
Other 4.1% 4.6%    
         
Fiscal 2014        
         
Category Q1 Q2 Q3 Q4
Sausage 22.3% 23.5% 29.5% 21.5%
Sides 39.4% 40.2% 40.7% 43.9%
Frozen 5.0% 5.1% 4.8% 4.8%
Food Service 29.7% 27.5% 21.5% 25.7%
Other 3.6% 3.7% 3.5% 4.1%

BEF Foods net sales review (dollars in thousands)

  Q2 2015 Q2 2014
Gross sales $ 104,608 $ 104,243
Less: promotions (11,488) (11,616)
Less: returns and slotting (992) (527)
Net sales $ 92,128 $ 92,100
CONTACT: Scott C. Taggart

         Vice President, Investor Relations

         (614) 492-4954
Source: Bob Evans Farms, Inc.

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