Bob Evans Farms, Inc.
Dec 1, 2015

Bob Evans Reports Fiscal 2016 Second-Quarter Results; Board Approves $100 Million Increase in Current Share Repurchase Authorization

NEW ALBANY, Ohio, Dec. 01, 2015 (GLOBE NEWSWIRE) --  Bob Evans Farms, Inc. (NASDAQ:BOBE) today announced its financial results for the fiscal 2016 second quarter ended Friday, October 23, 2015.  On a GAAP basis, the Company reported net income of $6.4 million, or $0.29 per diluted share, compared with net income of $6.0 million, or $0.25 per diluted share, in the corresponding period last year.  On an adjusted basis(1), non-GAAP net income was $9.2 million, or $0.41 per diluted share, compared with net income of $8.6 million, or $0.36 per diluted share, in the corresponding period last year.  

Second quarter fiscal 2016 commentary
Executive Chairman Doug Benham said, "Our teams continue focusing their efforts on improvements in both of our businesses and execution of strategic initiatives.  BEF Foods had another successful quarter with double-digit pounds sold percentage gains in both refrigerated dinner side dishes and sausage and is poised for a strong holiday selling season. 

"At Bob Evans Restaurants, second-quarter same-store sales performance did not meet our expectations. Turnarounds are often choppy, and our second quarter restaurant sales results reflect that.  We continue testing and evaluating promotional and menu strategies to drive sustainable and profitable sales growth.  We are committed to the overall strategy we outlined last quarter:  improving the quality of our food offerings; lowering overall discounting that was historically used to drive transactions; and optimizing our menu design and investments in labor to deliver a better guest experience.  We recently relaunched a more profitable three-course dinner platform system-wide to address weakness at dinner; began rolling out further product enhancements to our breakfast menu, including a new coffee blend and improved hot cakes and omelets; and introduced Broasted® Chicken Tenders in our restaurant locations where the Broasted Chicken platform has been rolled out (55% of system).  All of these actions are designed to drive increased transactions and sales gains by elevating our food quality and guest experience.

"At the corporate level, we identified an additional $5 million of cost savings opportunities during the second quarter; bringing expected fiscal 2016 savings to nearly $20 million, equating to an annual savings rate of $28 million.  We also completed a $51.6 million sale-leaseback transaction of two BEF Foods manufacturing facilities and are progressing with the previously announced initiatives to monetize our corporate headquarters and up to $200 million of restaurant properties.  During the quarter, we also amended our credit facility to enable the sale-leaseback of the restaurant properties and eliminate the $150 million limit on fiscal 2016 share repurchases.

Benham concluded, "We remain confident in the continued success of BEF Foods and our expectations for a turnaround of Bob Evans Restaurants.  This confidence is reflected not only in our reaffirmation of fiscal 2016 earnings guidance, but by recent board approval of a $100 million increase in the Company's share repurchase authorization and a 9.7% increase in the quarterly dividend.  We were also pleased to announce two weeks ago that effective January 1, 2016, Saed Mohseni will join Bob Evans Farms to assume the role of president and chief executive officer. Saed brings a strong track record as a restaurant operator with an intense focus on raising the quality of the overall guest experience.  Saed's passion and more than 30 years of experience in these areas will be critical enablers of Bob Evans Restaurants' turnaround and continued profitable growth at BEF Foods.  On behalf of Bob Evans' board, management, and team members, I welcome Saed to Bob Evans."

Chief Administrative Officer and Chief Financial Officer Mark Hood said, "We posted strong operating results at BEF Foods for the fourth consecutive quarter.  BEF Foods' non-GAAP operating income increased 176 percent to $17.6 million.  This increase is a result of a 12.6 percent increase in retail pounds sold, with double-digit growth in both our refrigerated side dish and sausage categories, combined with lower sow costs net of trade ($3.4 million) and improved plant operating efficiencies.  We are on track with our key initiatives in fiscal 2016, including ERP implementation in our plants and the expansion of our refrigerated side-dish manufacturing facility.  We look forward to further leveraging the momentum we have created at BEF Foods.

"Bob Evans Restaurants remains in the early innings of its turnaround as we continue to focus on opportunities to drive profitable transaction growth.  Our teams continue to better manage food, labor, and other operating costs.  We believe continued evolution of our discounting practices and value positioning through an improved menu and new product news, along with a shift in marketing spend from broadcast media to local and digital media, will improve sales and profits."

Second-quarter fiscal 2016 Bob Evans Restaurants segment summary
Bob Evans Restaurants' net sales were $230.7 million, a decline of $10.4 million, or 4.3 percent, compared to net sales of $241.2 million in the corresponding period last year.  Same-store sales declined 3.2 percent in the quarter, with the balance of the net sales decline due to net restaurant closures.  Bob Evans closed two restaurants during the second quarter, for a total of 20 fiscal 2016 restaurant closures year-to-date.

Same-Store Sales
(SSS) Restaurants
AugustSeptemberOctober 2Q  FY '16
540 -1.3% -3.8% -4.4% -3.2%


Bob Evans Restaurants' GAAP operating income was $13.3 million, compared to $20.6 million in the corresponding period last year.  Bob Evans Restaurants' non-GAAP operating income was $13.6 million, compared to $20.8 million in the prior year, a decline of $7.1 million.  The decline resulted from approximately $3.6 million of sales deleverage combined with the net impact of a $0.3 million increase in food cost rate, primarily as a result of higher egg prices (an approximate $2 million impact); a $2.7 million increase in labor and benefit cost rate driven primarily by increased average wage rates and health insurance costs, net of direct labor hours savings; a $0.8 million increase in other operating expenses driven by increased repair and maintenance and service contract expenses, net of lower occupancy and utility costs; a $0.5 million decline in S,G&A; a $0.1 million decline in depreciation expense; and $0.3 million of costs related to restaurant impairment

Second-quarter fiscal 2016 BEF Foods segment summary
BEF Foods' net sales were $94.3 million, an increase of $2.2 million, or 2.3 percent, compared to $92.1 million in the corresponding period last year. Overall, total pounds sold increased 5.1 percent compared to the prior-year period.  From a net sales perspective, a 15.1 percent increase in sausage pounds sold and a 14.2 percent increase in side-dish pounds sold were partially offset by a $3.2 million increase in trade spending (reduces net sales), as well as a 26.8 percent decline in foodservice pounds sold.  

BEF Foods' GAAP operating income was $14.0 million, compared to $6.4 million in the year ago period.  BEF Foods' non-GAAP operating income was $17.6 million, compared to $6.4 million in the prior year, an improvement of $11.2 million.  The improvement resulted from approximately $6.5 million of favorable sales mix, $3.4 million of net sow cost favorability, and $1.3 million resulting from sales leverage and plant efficiencies partially offset by increased advertising and S,G&A.

Second-quarter fiscal 2016 Corporate and Other summary
Corporate and Other's GAAP operating costs were $15.9 million, compared to $18.0 million in the year ago period.  Corporate and Other's non-GAAP operating costs were $15.9 million, compared to $14.2 million in the prior year, an increase of $1.6 million due to $0.7 million of increased S,G&A costs associated primarily with losses related to deferred compensation plan investments and ERP support costs, partially offset by cost savings initiatives; and $0.9 million resulting from increased depreciation and amortization expense related primarily to ERP capital expenditures.

Second-quarter fiscal 2016 net interest expense - The Company's non-GAAP net interest expense was $2.4 million in the second quarter, a decline of $0.3 million, compared to $2.7 million in the corresponding period last year.  The borrowing rate on the Company's outstanding debt was 1.95 percent at the end of the second quarter, compared to 2.16 percent at the end of the comparable prior-year period.   

Second-quarter fiscal 2016 taxes - The Company's 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 recognized GAAP tax expense of 24.8 percent for the second quarter, as compared to 11.3 percent for the prior-year period. The increase in the tax rate was driven primarily by discrete items booked in the second quarter of fiscal year 2015 related to the work opportunity tax credit and officers life insurance proceeds.  This increase impacted second-quarter diluted non-GAAP earnings per share by approximately $0.08. Year-to-date, the Company recognized GAAP tax expense of 24.6 percent, as compared to 4.5 percent for the prior-year, equating to a diluted non-GAAP earnings per share impact of approximately $0.14. The non-GAAP tax rate was approximately 28 percent for the second quarter, reflecting the Company's annual non-GAAP estimated tax rate.

Second-quarter fiscal 2016 balance sheet highlights - The Company's cash balance and revolver borrowings at the end of the second quarter of fiscal 2016 were $5.4 million and $471.4 million, respectively, compared to $3.7 million and $465.0 million, respectively, in the prior year.  The Company was in compliance with its debt covenants at the end of the second quarter.  The increase in borrowings was primarily the result of the Company's $44.4 million share repurchase activity during the second quarter, partially offset by increased net income, lower capital expenditures, and other changes in operating cash flow.  The Company's leverage ratio as defined in its credit agreement was 3.12 at the end of the quarter, down from 3.22 in the prior quarter, and 3.81 in the prior-year period.

Fiscal year 2016 outlook
Chief Administrative Officer and Chief Financial Officer Mark Hood said, "While we are reaffirming our fiscal 2016 diluted non-GAAP EPS guidance range of $1.85 to $2.00, our underlying assumptions have changed.  BEF Foods' expected performance has increased, and we have identified additional fiscal 2016 cost savings opportunities.  However, favorability in those areas is offset by lower than expected same-store sales performance at Bob Evans Restaurants as we continue to execute the turnaround in a macroeconomic environment where consumer spending appears to have slowed and competitive promotional activity is becoming more prevalent.

"As noted previously, our guidance includes the estimated impact of monetization of our headquarters building and select industrial properties, but does not include the impact of a potential restaurant real estate transaction." 

Summary of performance drivers:  fiscal 2016 guidance versus fiscal 2015

 1Q (actual)2Q (actual) 3Q4Q  Full
Year
sss% 2016 (guidance) -0.3% -3.2%negative
low-single
digits
negative
low-single
digits
-2.5% to
-1.0%
sss% 2015 (actual) -2.0% 0.0% 3.8% 2.1% 0.9%
sow costs (per hundredweight) 2016 (guidance)$38.75 $53.31 $57 $60 $53 
sow costs (per hundredweight) 2015 (actual)$87.87 $78.82 $67.79 $43.02 $69.41 


  
Guidance MetricFY ‘16
Consolidated net salesapproximately $1.35 billion
Bob Evans Restaurants same-store sales -2.5% to -1.0 percent
Bob Evans Restaurants commodity pricingapproximately 3.5% (including eggs)
BEF Foods net sales$380 to $390 million
Capital expenditures$78 to $82 million
ERP implementation (included in S,G&A)$2.0 to $2.5 million
Depreciation and amortization$81 to $84 million
Net interest expense$11 to $12 million
Tax rate27.5% to 28.5%
Diluted weighted-average share count21.8 million shares
Non-GAAP earnings per diluted share$1.85 to $2.00
  


This outlook is subject to a number of factors beyond the Company's control, including the risk factors discussed in the Company's fiscal 2015 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 2016 results at 10 a.m. (ET) on Wednesday, December 2, 2015.  The dial-in number is (855) 468-0551, access code 77827034.  A replay will be available at (800) 585-8367, access code 77827034.

A simultaneous webcast will be available at http://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 24, 2015, 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.  Any strategic transaction with respect to our headquarters or a portion of our restaurant real estate remains subject to evaluation by the Board and there can be no assurance if and when any such transaction will be undertaken or consummated.  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 23, 2015), Bob Evans Restaurants owned and operated 547 family restaurants in 18 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) 
Second quarter Fiscal 2016, three months ended October 23, 2015, compared to the corresponding period a year ago:

(in thousands, except per share amounts)    Basic EPS Diluted EPS
 Three Months Ended Three Months Ended Three Months Ended
 October 23,
2015
 October 24,
 2014
 October 23,
2015
 October 24,
2014
 October 23,
2015
 October 24,
2014
Operating Income (Loss) as Reported           
Bob Evans Restaurants$13,323  $20,627          
BEF Foods13,997  6,356         
Corporate and Other(15,886) (17,971)        
Operating Income11,434  9,012          
Net interest expense2,883  2,203         
Income Before Income Taxes8,551  6,809         
Provision for income taxes2,120  770         
Net Income as reported6,431  6,039  $0.29  $0.26  $0.29  $0.25 
            
Adjustments           
Bob Evans Restaurants           
Severance/Restructuring318            
Activism, Strategic Initiatives and Other  137         
 318  137         
BEF Foods           
Loss on Sale of Assets3,606           
Activism, Strategic Initiatives and Other  17         
 3,606  17         
Corporate and Other           
Activism, Strategic Initiatives and Other  3,725         
    3,725         
Total adjustments           
Severance/Restructuring318            
Loss on Sale of Assets3,606           
Activism, Strategic Initiatives and Other  3,879         
 3,924  3,879         
Non-GAAP operating income (loss)            
Bob Evans Restaurants13,641  20,764         
BEF Foods17,603  6,373         
Corporate and Other(15,886) (14,246)        
Total non-GAAP operating income15,358  12,891         
Adjustments to net interest expense(480) 458         
Non-GAAP net interest expense2,403  2,661         
Non-GAAP  Income Before Taxes12,955  10,230         
Adjustments to income tax provision1,636  835         
Non-GAAP Provision for Income Taxes3,756  1,605         
Non-GAAP Net Income$9,199  $8,625  $0.42  $0.37  $0.41  $0.36 
            
Weighted Average Shares Outstanding    22,115  23,509  22,233  23,735 


Second quarter Fiscal 2016, three months ended October 23, 2015, compared to the corresponding period a year ago:

(in thousands) Three Months Ended
  Consolidated Results Bob Evans Restaurants
  October % of October % of October % of October % of
  23, 2015 Sales 24, 2014 Sales 23, 2015 Sales 24, 2014 Sales
Operating income as reported                
                 
Net Sales $325,021    $333,279    $230,741    $241,151   
Cost of sales 102,709  31.6% 116,012  34.8% 61,725  26.8% 64,165  26.6%
Operating wage and fringe benefit expenses 104,403  32.1% 105,613  31.7% 93,460  40.4% 94,834  39.3%
Other operating expenses 56,181  17.3% 54,195  16.3% 42,984  18.6% 42,290  17.5%
Selling, general and administrative expenses 29,902  9.2% 28,972  8.7% 5,433  2.4% 5,572  2.3%
Depreciation and amortization expense 20,107  6.2% 19,475  5.8% 13,531  5.9% 13,663  5.7%
Impairments  285  0.1%   % 285  0.1%   %
Total as reported 11,434  3.5% 9,012  2.7%  13,323  5.8% 20,627  8.6%
                 
Adjustments                
                 
Net Sales                
Cost of sales                
Operating wage and fringe benefit expenses     (15)       (15)  
Other operating expenses     (115)       (115)  
Selling, general and administrative expenses (3,924)   (3,749)   (318)   (7)  
Depreciation and amortization expense                
Impairments                
Total Adjustments 3,924    3,879    318    137   
                  
Non-GAAP operating income                
                  
Net Sales 325,021    333,279    230,741    241,151   
Cost of sales 102,709  31.6%  116,012  34.8% 61,725  26.8% 64,165   26.6%
Operating wage and fringe benefit expenses 104,403  32.1% 105,598  31.7% 93,460  40.4% 94,819  39.3%
Other operating expenses 56,181  17.3% 54,080  16.2% 42,984  18.6% 42,175  17.5%
Selling, general and administrative expenses 25,978  8.0% 25,223  7.6% 5,115  2.3% 5,565  2.3%
Depreciation and amortization expense 20,107  6.2% 19,475   5.8% 13,531  5.9% 13,663  5.7%
Impairments 285  0.1%   % 285  0.1%   %
Total non-GAAP operating income $15,358  4.7% $12,891  3.9% $13,641  5.9% $20,764  8.6%


(in thousands)Three Months Ended
 BEF Foods Corporate and Other
 October 
23, 2015
 % of
Sales
 October
24, 2014
 % of
Sales
 October 
23, 2015
 October
24, 2014
Operating income (loss) as reported            
             
Net Sales$94,280    $ 92,128    $  $ 
Cost of sales40,984  43.5% 51,847  56.3%    
Operating wage and fringe benefit expenses10,943  11.7% 10,779  11.7%     
Other operating expenses13,197  14.0% 11,905  12.9%    
Selling, general and administrative expenses10,964  11.6% 6,918  7.5% 13,505  16,482 
Depreciation and amortization expense4,195  4.4% 4,323  4.7% 2,381  1,489 
Impairments  %   %    
Total as Reported13,997  14.8% 6,356  6.9% (15,886) (17,971)
            
Adjustments           
             
Net Sales           
Cost of sales           
Operating wage and fringe benefit expenses           
Other operating expenses           
Selling, general and administrative expenses(3,606)   (17)     (3,725)
Depreciation and amortization expense           
Impairments           
Total adjustments 3,606    17      3,725 
            
Non-GAAP operating income (loss)           
            
Net Sales94,280     92,128       
Cost of sales40,984  43.5% 51,847  56.3%    
Operating wage and fringe benefit expenses10,943  11.7% 10,779  11.7%    
Other operating expenses13,197  14.0% 11,905   12.9%    
Selling, general and administrative expenses7,358  7.7%  6,901  7.5% 13,505  12,757 
Depreciation and amortization expense4,195  4.4% 4,323  4.7% 2,381  1,489  
Impairments  %   %    
Total non-GAAP operating income (loss)$17,603  18.7% $6,373  6.9% $(15,886) $(14,246)


Bob Evans Farms, Inc.

Earnings Release Fact Sheet (unaudited)
Second quarter Fiscal 2016, six months ended October 23, 2015, compared to the corresponding period a year ago:

(in thousands, except per share amounts)    Basic EPS Diluted EPS
 Six Months Ended Six Months Ended Six Months Ended
 October 23,
2015
 October 24,
2014
 October 23,
2015
 October 24,
2014
 October 23,
2015
 October 24,
2014
Operating Income (Loss) as Reported           
Bob Evans Restaurants$23,132  $35,555         
BEF Foods 29,834  9,401         
Corporate and Other(33,270) (35,880)        
Operating Income19,696  9,076         
Net interest expense5,489  3,819         
Income Before Income Taxes14,207  5,257         
Provision for income taxes3,496   234         
Net Income as reported10,711  5,023  $0.48  $0.21  $0.47  $0.21 
            
Adjustments           
Bob Evans Restaurants           
Impairments  1,577         
Severance/Restructuring318  91         
Activism, Strategic Initiatives and Other  300         
Litigation Reserves10,500           
 10,818  1,968          
BEF Foods           
Severance/Restructuring  667         
Loss on Sale of Assets3,606           
Activism, Strategic Initiatives and Other  17         
 3,606  684         
Corporate and Other           
Severance/Restructuring  191         
Loss on Sale of Assets  118         
Activism, Strategic Initiatives and Other  5,948         
   6,257         
Total adjustments           
Impairments  1,577         
Severance/Restructuring318  949         
Loss on Sale of Assets3,606  118         
Activism, Strategic Initiatives and Other  6,265          
Litigation Reserves10,500           
 14,424  8,909         
Non-GAAP operating income (loss)           
Bob Evans Restaurants33,950  37,523         
BEF Foods33,440  10,085         
Corporate and Other(33,270) (29,623)        
Total non-GAAP operating income34,120  17,985         
Adjustments to net interest expense(480) 903          
Non-GAAP net interest expense5,009  4,722         
Non-GAAP Income Before Taxes29,111  13,263         
Adjustments to income tax provision4,712  2,094         
Non-GAAP Provision for Income Taxes8,208  2,328         
Non-GAAP Net Income$20,903  $10,935  $0.93  $0.47  $0.93  $ 0.46 
            
Weighted Average Shares Outstanding    22,421  23,467  22,572  23,698 


Second quarter Fiscal 2016, six months ended October 23, 2015, compared to the corresponding period a year ago:

(in thousands)Six Months Ended
 Consolidated Results Bob Evans Restaurants
 October
23, 2015
 % of
Sales
 October
24, 2014
 % of
Sales
 October
23, 2015
 % of
Sales
 October
24, 2014
 % of
Sales
Operating income as reported               
                
Net Sales$646,734    $659,619    $469,410    $481,302   
Cost of sales199,030  30.8% 230,180  34.9% 123,192  26.2% 127,376   26.5%
Operating wage and fringe benefit expenses209,287  32.4% 210,042  31.8% 188,922  40.2% 189,675  39.4%
Other operating expenses107,815  16.7% 107,909  16.4% 83,001  17.7% 84,795  17.6%
Selling, general and administrative expenses70,361  10.9% 61,387  9.3% 23,868  5.1% 14,426   3.0%
Depreciation and amortization expense40,260  6.2% 39,448  6.0%  27,010  5.8% 27,898  5.8%
Impairments285  % 1,577  0.2% 285  0.1% 1,577  0.3%
Total as reported$19,696  3.0% $9,076  1.4 % $23,132  4.9% $35,555  7.4%
                 
Adjustments               
                
Net Sales$    $     $    $   
Cost of sales               
Operating wage and fringe benefit expenses    (29)       (29)  
Other operating expenses    (262)       (262)  
Selling, general and administrative expenses(14,424)    (7,041)   (10,818)   (100)  
Depreciation and amortization expense               
Impairments    (1,577)       (1,577)  
Total Adjustments$14,424    $8,909    $10,818    $1,968   
                
Non-GAAP operating income               
                
Net Sales$646,734    $659,619    $469,410    $481,302   
Cost of sales199,030  30.8% 230,180  34.9% 123,192  26.2% 127,376  26.5%
Operating wage and fringe benefit expenses209,287  32.4% 210,013  31.8% 188,922  40.2% 189,646  39.4%
Other operating expenses107,815  16.7% 107,647  16.4% 83,001  17.7% 84,533  17.5%
Selling, general and administrative expenses55,937  8.6% 54,346  8.2% 13,050  2.8% 14,326  3.0%
Depreciation and amortization expense40,260  6.2% 39,448  6.0% 27,010  5.8% 27,898  5.8 %
Impairments285  %   % 285  0.1%   %
Total non-GAAP operating income$34,120  5.3% $17,985  2.7% $33,950  7.2% $ 37,523  7.8%


(in thousands)Six Months Ended
 BEF Foods Corporate and Other
 October
23, 2015
 % of
Sales
 October
24, 2014
 % of
Sales
 October
23, 2015
 October
24, 2014
Operating income (loss) as reported           
             
Net Sales$177,324    $178,317    $  $ 
Cost of sales75,838  42.8% 102,804  57.7%    
Operating wage and fringe benefit expenses20,365  11.5% 20,367  11.3%     
Other operating expenses24,814  14.0% 23,114  13.0%    
Selling, general and administrative expenses17,880  10.1% 14,032  7.9% 28,613  32,929 
Depreciation and amortization expense8,593  4.8% 8,599  4.8% 4,657  2,951 
Impairments  %   %    
Total as Reported$29,834  16.8% $9,401  5.3% $(33,270) $(35,880)
            
Adjustments           
            
Net Sales$     $    $  $ 
Cost of sales           
Operating wage and fringe benefit expenses           
Other operating expenses           
Selling, general and administrative expenses(3,606)   (684)     (6,257)
Depreciation and amortization expense           
Impairments           
Total adjustments$3,606    $684    $  $6,257 
            
Non-GAAP operating income (loss)           
             
Net Sales$177,324    $178,317    $  $ 
Cost of sales75,838   42.8% 102,804  57.7%    
Operating wage and fringe benefit expenses20,365  11.5% 20,367  11.3%    
Other operating expenses24,814  14.0% 23,114   13.0%    
Selling, general and administrative expenses14,274  8.0%  13,348  7.5% 28,613  26,672 
Depreciation and amortization expense8,593  4.8% 8,599  4.8% 4,657  2,951  
Impairments  %   %    
Total non-GAAP operating income (loss)$33,440  18.9% $10,085  5.7% $(33,270) $(29,623)


(in thousands, except per share amounts)Consolidated Results
 Three Months Ended
 October 23, 2015 % of
sales
 October 24, 2014 % of
sales
Net sales$325,021    $333,279   
Cost of sales102,709   31.6% 116,012   34.8%
Operating wage and fringe benefit expenses104,403   32.1% 105,613   31.7%
Other operating expenses56,181    17.3% 54,195   16.3%
Selling, general and administrative expenses29,902   9.2% 28,972   8.7%
Depreciation and amortization expense20,107   6.2% 19,475   5.8%
Impairments285   0.1%    %
Operating Income11,434   3.5% 9,012   2.7%
Net interest expense2,883   0.9% 2,203   0.7%
Income Before Income Taxes8,551   2.6% 6,809   2.0%
Provision for income taxes2,120   0.7% 770   0.2%
Net Income$6,431   2.0% $6,039   1.8%
        
Earnings Per Share       
Basic$0.29    $0.26   
Diluted$0.29    $0.25   
        
Cash dividends paid per share$0.31    $0.31   
        
Weighted average shares outstanding       
Basic22,115     23,509   
Dilutive Shares118    226   
Diluted22,233    23,735   
         
Shares outstanding at quarter end21,379    23,600    


The number of dilutive shares that were not included in the computation of dilutive earnings per share, because to do so would have been antidilutive, was 251,799 shares for the three months ended October 23, 2015.

(in thousands)Three Months Ended
 Bob Evans Restaurants BEF Foods
 October 23, 2015 October 24, 2014 October 23, 2015 October 24, 2014
Net sales$230,741    $241,151    $94,280    $92,128   
Cost of sales61,725  26.8% 64,165  26.6% 40,984  43.5% 51,847  56.3%
Operating wage and fringe benefit expenses93,460  40.4% 94,834  39.3% 10,943  11.7% 10,779  11.7%
Other operating expenses42,984  18.6% 42,290  17.5% 13,197  14.0% 11,905  12.9%
Selling, general and administrative expenses5,433  2.4% 5,572  2.3% 10,964  11.6% 6,918  7.5%
Depreciation and amortization expense13,531  5.9% 13,663  5.7%  4,195  4.4% 4,323  4.7%
Impairments285  0.1%   %   %   %
Operating income$13,323  5.8% $20,627  8.6% $13,997  14.8% $6,356  6.9%


(in thousands)Three Months Ended
 Corporate and Other
 October 23, 2015 October 24, 2014
Selling, general and administrative expenses$13,505  $16,482 
Depreciation and amortization expense2,381  1,489 
Operating loss$(15,886) $(17,971)


(in thousands, except per share amounts)Consolidated Results
 Six Months Ended
 October 23, 2015 % of
sales
 October 24, 2014 % of
sales
Net sales$646,734    $659,619   
Cost of sales199,030  30.8% 230,180  34.9%
Operating wage and fringe benefit expenses209,287  32.4% 210,042  31.8%
Other operating expenses107,815  16.7% 107,909  16.4%
Selling, general and administrative expenses70,361  10.9% 61,387   9.3%
Depreciation and amortization expense40,260  6.2% 39,448  6.0%
Impairments285  % 1,577  0.2 %
Operating Income19,696  3.0% 9,076  1.4%
Net interest expense5,489  0.8% 3,819  0.6%
Income Before Income Taxes14,207  2.2% 5,257  0.8%
Provision for income taxes3,496  0.5% 234  %
Net Income$10,711  1.7% 5,023  0.8%
        
Earnings Per Share       
Basic$0.48     $0.21   
Diluted$0.47    $0.21    
        
Cash dividends paid per share$0.62    $0.62   
        
Weighted average shares outstanding       
Basic22,421    23,467   
Dilutive Shares151    231   
Diluted 22,572    23,698   
        
Shares outstanding at quarter end21,379    23,600   


The number of dilutive shares that were not included in the computation of dilutive earnings per share, because to do so would have been antidilutive, was 241,445 shares for the six months ended October 23, 2015.

(in thousands)Six Months Ended
 Bob Evans Restaurants BEF Foods
 October 23, 2015 October 24, 2014 October 23, 2015  October 24, 2014
Net sales$469,410    $481,302    $177,324    $178,317   
Cost of sales123,192  26.2% 127,376  26.5% 75,838   42.8% 102,804  57.7%
Operating wage and fringe benefit expenses188,922  40.2% 189,675  39.4% 20,365  11.5% 20,367  11.3%
Other operating expenses83,001  17.7% 84,795  17.6% 24,814  14.0% 23,114  13.0%
Selling, general and administrative expenses23,868  5.1% 14,426  3.0% 17,880  10.1% 14,032  7.9%
Depreciation and amortization expense27,010  5.8% 27,898  5.8% 8,593  4.8% 8,599  4.8%
Impairments285  0.1% 1,577  0.3%   %   %
Operating income$23,132  4.9%  $35,555  7.4% $29,834  16.8% $9,401  5.3%


(in thousands)Six Months Ended
 Corporate and Other
 October 23, 2015 October 24, 2014
Selling, general and administrative expenses$28,613  $32,929 
Depreciation and amortization expense4,657  2,951 
Operating loss$(33,270) $(35,880)


Consolidated Balance Sheets

 Unaudited  
 October 23, 2015 April 24, 2015
(in thousands, except par value amounts)  
Assets
Current Assets   
Cash and equivalents$5,361   $6,358 
Accounts receivable, net31,697  26,100 
Inventories29,178  24,620 
Deferred income taxes16,117  16,117 
Federal and state income taxes receivable12,957  23,722 
Prepaid expenses and other current assets6,171  5,035 
Current assets held for sale17,327  22,243 
Total Current Assets118,808  124,195 
Property, Plant and Equipment1,552,357  1,585,882 
Less accumulated depreciation786,858  756,015 
Net Property, Plant and Equipment765,499  829,867 
Other Assets   
Deposits and other5,502  3,756 
Notes receivable19,780  18,544 
Rabbi trust assets29,849  32,302 
Goodwill and other intangible assets19,908  19,986 
Non-current deferred tax assets2,326  2,326 
Long-term assets held for sale  1,611 
Total Other Assets77,365  78,525 
Total Assets$961,672  $1,032,587 
Liabilities and Stockholders' Equity
Current Liabilities   
Current portion of long-term debt$415  $ 409 
Accounts payable38,473  30,019 
Accrued property, plant and equipment purchases5,477  4,820 
Accrued non-income taxes17,023  14,951 
Accrued wages and related liabilities21,918  34,529 
Self-insurance reserves20,804  18,900 
Deferred gift card revenue11,920  13,714 
Current reserve for uncertain tax provision1,582  1,594 
Other accrued expenses43,961  34,156 
Total Current Liabilities161,573  153,092 
Long-Term Liabilities   
Deferred compensation17,740  22,481 
Reserve for uncertain tax positions2,733  2,767 
Deferred income taxes17,986  17,825 
Deferred rent and other8,155  5,755 
Credit facility borrowings and other long-term debt474,253  450,676 
Total Long-Term Liabilities520,867  499,504 
Stockholders' Equity   
Common stock, $.01 par value; authorized 100,000 shares; issued 42,638 shares at October 23, 2015, and April 24, 2015426  426 
Capital in excess of par value240,047  235,958 
Retained earnings832,819  836,362 
Treasury stock, 21,259 shares at October 23, 2015, and 19,231 shares at April 24, 2015, at cost(794,060) (692,755)
Total Stockholders' Equity279,232  379,991 
Total Liabilities and Stockholders' Equity$961,672  $1,032,587 


Consolidated Statements of Cash Flows

(in thousands)Six Months Ended
 October 23, 2015 October 24, 2014
Operating activities:   
Net income$10,711  $5,023 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:   
Depreciation and amortization40,260  39,448 
Impairments285  1,577 
Loss (Gain) on disposal of fixed assets1,603  (376)
Loss (Gain) on rabbi trust assets2,453  (1,233)
(Gain) Loss Deferred compensation(1,462) 880 
Share based compensation3,329   1,888 
Accretion on long-term note receivable(1,011) (903)
Deferred income taxes161   
Amortization of deferred financing costs1,336  448 
Cash provided by (used for) assets and liabilities:       
Accounts receivable(5,597) 106 
Inventories(4,558)  (2,734)
Prepaid expenses and other current assets(1,136) (1,453)
Accounts payable8,454  3,837 
Federal and state income taxes10,719  627 
Accrued wages and related liabilities(7,710) (1,600)
Self-insurance1,904  745 
Accrued non-income taxes2,072  (2,732)
Deferred gift card revenue(1,794) (1,775)
Other assets and liabilities6,332  (1,932)
Net cash provided by operating activities66,351  39,841 
Investing activities:       
Purchase of property, plant and equipment(26,667) (36,955)
Proceeds from sale of property, plant and equipment58,451  1,108 
Deposits and other(566) (261)
Net cash provided by (used in) investing activities31,218  (36,108 )
Financing activities:       
Cash dividends paid(14,040) (14,468 )
Gross proceeds from credit facility borrowings and other long-term debt380,192  211,072 
Gross repayments of credit facility borrowings and other long-term debt(356,610) (202,101)
Payments of debt issuance costs(2,517) (1,279)
Purchase of treasury stock(104,929)   
Proceeds from share-based compensation214  239 
Cash paid for taxes on share-based compensation(1,007) (1,768)
Excess tax benefits from stock-based compensation131  483 
Net cash used in financing activities(98,566) (7,822)
Net decrease in cash and equivalents(997) (4,089)
Cash and equivalents at the beginning of the period6,358  7,826 
Cash and equivalents at the end of the period$5,361  $ 3,737 


Summary of Operating Efficiency Savings Fiscal 2016 year to date (dollars in millions)

 Consolidated Bob Evans Restaurants BEF Foods Corporate and Other
S,G&A       
Wage-Related$4.9  $1.9  $0.5  $2.5 
Non Wage-Related0.8  0.4    0.4 
Total S,G&A5.7  2.3  0.5  2.9 
        
Non-S,G&A       
Wage-Related0.2    0.2   
Non Wage-Related1.5    1.5   
Total Non-S,G&A 1.7    1.7   
        
Year to date total$7.4  $2.3   $2.2  $2.9 


Bob Evans Restaurants openings and closings, by quarter

Fiscal Year Beginning
Total
 Q1 Q2 Q3* Q4* Full Year* Closings Ending
Total*
2016 567      1    1  20   548 
2015 561  1    2  4  7  1  567 
2014 560  1  1  1  1  4  3  561 
2013 565  2        2  7  560 
2012  563    2    2  4  2  565 

*Includes estimate for remaining quarters in fiscal 2016


Bob Evans Same-Store Sales Day Part Performance

Second-quarter Fiscal 2016 SSS% Day Part Performance - Total Chain
Day Part On-Premises Off-Premises Total
Breakfast  (1.2)%  7.6%  (0.4)%
Lunch  (3.4)%  (1.1)%  (3.1)%
Dinner  (7.6)%  (0.7)%  (6.2)%
Total  (3.9)%  0.9%  (3.2)%
       
Second-quarter Fiscal 2016 SSS% Day Part Performance - Restaurants offering Broasted Chicken
Day Part On-Premises Off-Premises Total
Breakfast  (1.9 )%  6.3%  (1.0)%
Lunch  (4.1)%  (0.7)%  (3.6)%
Dinner  (6.7)%  1.0%  (4.9)%
Total  (4.3)%  1.5%  (3.3)%
       
Second-quarter Fiscal 2016 SSS% Day Part Performance - Restaurants without Broasted Chicken
Day Part On-Premises Off-Premises Total
Breakfast  (0.4)%  9.9%  0.4%
Lunch  (2.3)%  (2.1)%  (2.3)%
Dinner  (9.0)%  (5.0)%  (8.4)%
Total  (3.4)%  (0.4)%  (3.1)%


Bob Evans Restaurants same-store sales analysis (18-month core; 540 restaurants)

 Fiscal 2016 Fiscal 2015* Fiscal 2014*
 Total Pricing /
Mix
 Transactions Total Pricing /
Mix
 Transactions Total Pricing /
Mix
 Transactions
May (0.3)%  3.9%  (4.2)%  (1.9)%  1.3%  (3.1)%  (0.5)%  2.8%  (3.4)%
June (0.9)%  4.4%  (5.3)%  (1.2)%  1.2%  (2.4)%  (0.4)%  2.8%  (3.1)%
July 0.3%  5.8%  (5.5)%  (2.7)%  0.9%  (3.6)%  (1.2)%  2.2%  (3.3)%
Q1 (0.3)%  4.8%  (5.0)%   (2.0)%  1.1%  (3.2)%  (0.7)%  2.6%  (3.2)%
                                     
August (1.3)%  3.3%  (4.6)%  (2.4)%   2.0%  (4.4)%  (0.8)%  3.0%  (3.7)%
September (3.8)%  2.9%  (6.6)%  1.7%  2.6%  (0.9)%  (2.2)%  2.6%   (4.8)%
October (4.4)%  1.5%  (5.8)%  0.4%  2.5%  (2.1)%   (2.6)%  1.6%  (4.3)%
Q2 (3.2)%  2.5%  (5.7)%  (0.1)%   2.4%  (2.4)%  (1.9)%  2.3%  (4.2)%
                                    
November       2.9%  2.8%  %  1.7%   2.8%  (1.1)%
December       3.9%  1.3%  2.6%  (3.5)%  2.8%  (6.3)%
January       5.2%  2.3%   2.9%  (4.7)%  4.2%  (8.8)%
Q3       3.8%  2.2%  1.6%  (1.7)%  3.3%  (5.0)%
                                     
February       2.4%  3.1%  (0.6)%  (6.7)%  3.0%  (9.8)%
March       0.9%  2.9%  (2.0)%  (4.1)%  2.1%  (6.3)%
April       2.3%  4.0%  (1.7)%  (2.6)%  1.8%  (4.4)%
Q4       2.1%  3.4%  (1.3)%  (4.3)%  2.3%  (6.6)%
                                     
Fiscal Year (1.7)%  3.6%  (5.4)%  0.9%   2.3%  (1.4 )%  (2.1)%  2.6%  (4.7)%

* Prior year data presentation reflects Company's current same store sales methodology.


Bob Evans Restaurants key restaurant sales data

 Bob Evans Restaurants
Average annual store sales ($) - FY15$1,730,000 
  
Q2 FY2016 day part mix (%): 
Breakfast33%
Lunch36%
Dinner31%
  
Q2 FY2016 dine-in check average per guest ($): 
Breakfast$9.30 
Lunch$9.65 
Dinner$9.73 
  
Q2 FY2016 dine-in check average per guest ($):$9.55 
Q2 FY2016 dine-in check average per ticket ($):$18.54 
Q2 FY2016 carry-out check average per ticket ($):$14.51 


BEF Foods historical sow cost review (average cost per hundredweight)
Fiscal Year Q1 Q2 Q3 Q4 Average
2016 $38.75  $53.31      $46.92 
2015 $87.87  $78.82  $67.79  $43.02  $69.41 
2014 $63.24  $77.33  $72.36  $78.47  $73.23 
2013 $54.19  $43.22  $58.73  $59.07  $53.87 
2012 $57.06  $67.82  $60.56  $60.41  $61.58 
           
           
BEF Foods total pounds sold review (inclusive of pounds sold to Bob Evans Restaurants)
Fiscal Year Q1 Q2 Q3 Q4 Average
2016  0.4%  5.7%      3.1%
2015  (6.1)%  (4.5)%  5.5%  0.9%  (0.9)%
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%
           
           
BEF Foods total pounds sold, by category      
Fiscal 2016          
Category Q1  Q2 Q3 Q4  
Sides  49.6%  50.7%      
Sausage  22.0%  22.3%       
Food Service - External  14.1%  12.5%      
Food Service - Intersegment  6.2%  6.6%      
Frozen  4.6%  4.5%      
Other  3.5%  3.4%      
           
Fiscal 2015          
Category Q1 Q2 Q3 Q4  
Sides  42.5%  46.9%  48.0%  49.8%  
Sausage  19.3%  20.5%  26.2%  23.7%  
Food Service - External  24.0%  18.0%  12.8%  11.8%  
Food Service - Intersegment  6.0%  6.0%  5.5%  5.8%  
Frozen  4.6%  5.0%  4.1%  4.8%  
Other  3.6%  3.6%   3.4%  4.1%  


BEF Foods net sales review (dollars in thousands)

 Q2 FY16 Q2 FY15
Gross sales$109,935  $104,608 
Less: promotions14,072  10,392 
Less: discounts559  1,095 
Less: returns and slotting1,024  993 
Net sales$94,280  $92,128 


 YTD 2016 YTD 2015
Gross sales$207,732  $199,478 
Less: promotions 26,925  17,992 
Less: discounts1,833  1,902 
Less: returns and slotting1,650   1,267 
Net sales$177,324  $178,317 
Contact:        

Scott C. Taggart

Vice President, Investor Relations

(614) 492-4954

Source: Bob Evans Farms, Inc.

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