Bob Evans Farms, Inc.
Aug 31, 2016

Bob Evans Reports Fiscal 2017 First-Quarter Results and Raises Fiscal 2017 EPS Guidance

NEW ALBANY, Ohio, Aug. 31, 2016 (GLOBE NEWSWIRE) -- Bob Evans Farms, Inc. (NASDAQ:BOBE) today announced its financial results for the fiscal 2017 first quarter ended Friday, July 29, 2016.  On a GAAP basis, the Company reported net income of $9.2 million, or $0.46 per diluted share, compared with net income of $4.3 million, or $0.19 per diluted share, in the corresponding period last year.  On a non-GAAP basis, net income was $9.6 million, or $0.48 per diluted share, compared with net income of $11.7 million, or $0.51 per diluted share, in the corresponding period last year.  

First-quarter fiscal 2017 commentary
President and Chief Executive Officer Saed Mohseni said, "BEF Foods began fiscal 2017 with continued strong volume growth during the first quarter.  Additionally, BEF Foods achieved market share gains in both its key side-dish and sausage product categories. We have completed the expansion of our Lima, Ohio, refrigerated side-dish plant and are now gearing up to meet peak holiday production which begins during the back half of the second quarter.  The Lima plant expansion provides the added production capacity that is critical to our ongoing efforts to gain additional points of distribution, particularly in West Coast growth markets.

"While Bob Evans Restaurant sales remained challenged during the first quarter, we are encouraged by the moderating sales trend that began in July and continued into the second quarter, with quarter-to-date same-store sales of -2.0 percent through August 29. We believe our efforts to enhance the guest experience through improved hospitality and food quality are gaining the attention of guests and improving our sales trend. Positive guest comments increased 24 percent during the first quarter, while negative comments declined substantially; a trend we believe will contribute to future sales improvements.  Our focus during the second quarter will be the system-wide launch of our exciting new value-oriented, guest-friendly menu along with relentless attention to improving the guest experience."

First-quarter fiscal 2017 Bob Evans Restaurants segment summary
Bob Evans Restaurants' net sales were $220.4 million, a decline of $18.3 million, or 7.7 percent, compared to net sales of $238.7 million in the corresponding period last year. Same-store sales declined 4.3 percent with the balance of the net sales decline due to net restaurant closures during the past year.  Five restaurants were closed and no new restaurants opened during the quarter.  At the end of the quarter, the Company operated 522 restaurants.     

Same-Store Sales
(SSS) Restaurants
MayJuneJuly1Q  FY '17
521 -2.8% -6.1% -4.1% -4.3%

Bob Evans Restaurants' GAAP operating income was $11.6 million, compared to GAAP operating income of $9.8 million in the corresponding period last year.  Bob Evans Restaurants' non-GAAP operating income was $12.1 million, compared to $20.3 million in the corresponding period last year, a decline of $8.2 million.  The decline in non-GAAP operating income was due primarily to lower sales and incremental investment in labor hours to support efforts to improve guest hospitality along with increased hourly wage rates as a result of minimum wage increases, partially offset by lower commodity costs, reduced discounting, and lower healthcare costs.  Additionally, the April 2016 sale-leaseback transaction of 143 restaurant properties reduced operating income by approximately $0.4 million due to a $2.7 million increase in rent, partially offset by a $2.3 decline in depreciation compared to the prior year period.

First-quarter fiscal 2017 BEF Foods segment summary
BEF Foods' net sales were $85.9 million, an increase of $2.9 million, or 3.5 percent, compared to $83.0 million in the corresponding period last year.  Pounds sold increased 6.4 percent while average net selling price per pound declined 2.7 percent compared to the corresponding period last year.  The decline in average net selling price reflects an increased sales mix of lower-priced, although higher-margin, side-dish products relative to sausage, as well as reduced net sausage pricing through increased trade spending.  From a net sales perspective, a 12.5 percent increase in side-dish pounds sold and a 4.9 percent increase in sausage pounds sold were partially offset by a $2.2 million increase in trade spending (reduces net sales), a 9.9 percent decline in food service pounds sold, and a 7.6 decline in frozen product pounds sold compared to the corresponding period last year.

BEF Foods' GAAP and non-GAAP operating income was $15.4 million, compared to $15.9 million in the corresponding period last year, a decline of $0.5 million.  The decline was due primarily to $2.1 million of increased sow cost, $2.2 million of increased trade spending, and a planned $1.2 million increase in advertising; largely offset by increased volume, favorable sales mix, and lower SG&A costs.  Additionally, the October 2015 sale-leaseback transaction of two industrial properties reduced operating income by approximately $0.4 million due to a $1.0 million increase in rent, partially offset by a $0.6 decline in depreciation compared to the prior year period.

First-quarter fiscal 2017 Corporate and Other summary  
Corporate and Other GAAP and non-GAAP operating costs were $13.3 million, compared to $17.4 million in the corresponding period last year, a decline of $4.1 million.  The decline was due primarily to lower legal and professional fees and lower compensation costs; partially offset by increased depreciation and amortization resulting from technology-related capital expenditures. 

First-quarter fiscal 2017 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 22.4 percent for the quarter, compared to 24.3 percent in the corresponding period last year. The decrease in the tax rate was driven primarily by the impact of yearly variances in the forecasted annual rate related to wage credits, the domestic productions activities deduction, and officers' life insurance.  For non-GAAP items, the tax rate was 22.6 percent, reflecting the Company's annual non-GAAP estimated tax rate adjusted for the impact of first quarter discrete items.

First-quarter fiscal 2017 balance sheet highlights - The Company's cash balance and outstanding debt at the end of the quarter were $4.4 million and $364.6 million, respectively, compared to $6.1 million and $491.1 million at the end of the corresponding period last year.  The Company was in compliance with its debt covenants at the end of the quarter.  The decrease in borrowings was primarily the result of the use of proceeds from recent real estate monetization transactions and operating cash flow to reduce debt, partially offset by share repurchases, capital expenditures, and dividend payments.  On a pro-forma basis, assuming the 2016 sale-leaseback transactions occurred at the beginning of fiscal 2016, the Company's quarter-end leverage ratio was 3.24.   

Fiscal year 2017 outlook
Chief Administrative and Chief Financial Officer Mark Hood said, "We have adjusted our fiscal 2017 outlook to reflect underlying changes in certain of our assumptions and are increasing our GAAP diluted EPS guidance range to $2.00 to $2.17, from $1.95 to $2.12.  Likewise, our non-GAAP diluted EPS guidance range has been raised to $2.05 to $2.20, from $2.00 to $2.15 previously. 

"At Bob Evans Restaurants, we continue to expect full-year negative low-single digit to flat same-store sales and a neutral to slightly positive commodity cost environment.  Additionally, we will continue to invest in improving the guest experience to drive sales.  As for BEF Foods, we have lowered our sow cost forecast to reflect current expectations for the remainder of the fiscal year.  At the corporate level, we have lowered our interest expense guidance to reflect a lower than anticipated interest rate environment this year and we will maintain our focus on lowering corporate and other costs required to support our businesses."

Guidance Metric
FY ‘17
Consolidated net sales$1.28 to $1.33 billion
Bob Evans Restaurants same-store salesnegative low-single digit to flat
Bob Evans Restaurants commodity pricingapproximately flat
BEF Foods net sales$400 to $420 million
BEF Foods sow cost (per hundredweight)$50-$53
Capital expenditures$75 to $80 million
Depreciation and amortization$71 to $75 million
Net interest expense$10 to $12 million
Tax rate23.5% to 24.5%
Diluted weighted-average share countapproximately 20 million shares
Remaining share repurchase authorization$78.5 million
GAAP diluted earnings per share$2.00 to $2.17
Non-GAAP diluted earnings per share$2.05 to $2.20

This outlook is subject to a number of factors beyond the Company's control, including the risk factors discussed in the Company's fiscal 2016 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 first-quarter fiscal 2017 results at 8:30 a.m. (ET) on Wednesday, August 31, 2016.  The dial-in number for the conference call is (855) 468-0551, access code 60710233.  A replay will be available at (800) 585-8367, access code 60710233.

A simultaneous webcast will be available at 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 29, 2016, 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 restaurant real estate remains subject to closing conditions and there can be no assurance of such a closing.  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 first fiscal quarter (July 29, 2016), Bob Evans Restaurants owned and operated 522 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


Bob Evans Farms, Inc.
Earnings Release Fact Sheet (unaudited)
First quarter Fiscal 2017, Three months ended July 29, 2016 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
 July 29,
 July 24,
 July 29,
 July 24,
 July 29,
 July 24,
Operating Income (Loss) as Reported           
Bob Evans Restaurants$11,602  $9,796         
BEF Foods15,387  15,851         
Corporate and Other(13,291) (17,385)         
Operating Income13,698  8,262          
Net interest expense1,893  2,606         
Income Before Income Taxes11,805  5,656          
Provision (benefit) for income taxes2,643  1,376         
Net Income as reported9,162  4,280  $0.46  $0.19  $0.46  $0.19 
Bob Evans Restaurants           
Store closure costs807            
Litigation Reserves(278) 10,500          
 529  10,500         
Total adjustments           
Store closure costs807           
Litigation Reserves(278 ) 10,500         
 529  10,500         
Non-GAAP operating income  (loss)           
Bob Evans Restaurants12,131  20,296         
BEF Foods15,387  15,851         
Corporate and Other(13,291) (17,385)        
Total non-GAAP operating income14,227  18,762         
Adjustments to net interest expense           
Non-GAAP net interest expense1,893   2,606         
Non-GAAP  Income Before Taxes12,334  16,156         
Adjustments to income tax provision (benefit)141  3,076         
Non-GAAP Provision for Income Taxes2,784  4,452         
Non-GAAP Net Income$9,550  $11,704  $0.48  $0.51  $0.48  $0.51 
Weighted Average Shares Outstanding    19,792  22,733  19,964  22,881 

First quarter Fiscal 2017, Three months ended July 29, 2016 compared to the corresponding period a year ago:
(in thousands) Three Months Ended
  Consolidated Results Bob Evans Restaurants
   July 29,
 % of
 July 24,
 % of
 July 29,
 % of
 July 24,
 % of
Operating income as reported                
Net Sales  $306,317    $321,713    $220,376    $238,669   
Cost of sales 93,250  30.4% 96,322  29.9% 55,236  25.1% 61,469   25.8%
Operating wage and fringe benefit expenses 100,698  32.9% 104,959   32.6% 91,515  41.5% 95,465  40.0%
Other operating expenses 55,642  18.2% 51,589  16.0% 42,544  19.3% 39,935  16.7%
Selling, general and administrative expenses 25,455   8.3% 40,428  12.6% 8,404  3.8% 18,524  7.8%
Depreciation and amortization expense 17,574  5.7% 20,153  6.3% 11,075  5.0% 13,480   5.6%
Total as reported 13,698  4.5%  8,262  2.6% 11,602  5.3% 9,796  4.1%
Net Sales                
Cost of sales                
Operating wage and fringe benefit expenses                
Other operating expenses (340)       (340)      
Selling, general and administrative expenses (189)   (10,500)   (189)   (10,500)  
Depreciation and amortization expense                
Total Adjustments 529    10,500    529    10,500   
Non-GAAP operating income                
Net Sales 306,317    321,713    220,376    238,669   
Cost of sales 93,250  30.4% 96,322  29.9% 55,236  25.1% 61,469  25.8%
Operating wage and fringe benefit expenses 100,698  32.9% 104,959  32.6% 91,515  41.5% 95,465  40.0%
Other operating expenses 55,302  18.1% 51,589  16.0% 42,204  19.2% 39,935  16.7%
Selling, general and administrative expenses 25,266  8.3% 29,928  9.4% 8,215  3.7% 8,024  3.4%
Depreciation and amortization expense 17,574  5.7% 20,153  6.3% 11,075  5.0 % 13,480  5.6%
Total non-GAAP operating income $14,227  4.6% $18,762  5.8% $12,131  5.5% $20,296  8.5%

(in thousands) Three Months Ended
  BEF Foods Corporate and Other
  July 29,
 % of
 July 24,
 % of
 July 29, 2016 July 24, 2015
Operating income (loss) as reported            
Net Sales $85,941    $83,044    $  $ 
Cost of sales 38,014  44.2% 34,853  42.0%     
Operating wage and fringe benefit expenses 9,184  10.7% 9,494  11.4%    
Other operating expenses 13,098   15.2% 11,654  14.0%    
Selling, general and administrative expenses 6,464  7.6% 6,795  8.2%  10,586  15,109 
Depreciation and amortization expense 3,794  4.4% 4,397  5.3% 2,705  2,276 
Total as Reported 15,387  17.9% 15,851  19.1% (13,291) (17,385)
Net Sales             
Cost of sales            
Operating wage and fringe benefit expenses            
Other operating expenses            
Selling, general and administrative expenses            
Depreciation and amortization expense            
Total adjustments            
Non-GAAP operating income (loss)            
Net Sales 85,941    83,044        
Cost of sales 38,014  44.2% 34,853  42.0%    
Operating wage and fringe benefit expenses 9,184  10.7% 9,494  11.4%    
Other operating expenses 13,098  15.2% 11,654  14.0%    
Selling, general and administrative expenses 6,464  7.6% 6,795  8.2% 10,586  15,109 
Depreciation and amortization expense  3,794  4.4% 4,397  5.3% 2,705  2,276 
Total non-GAAP operating income (loss) $15,387  17.9% $15,851  19.1% $(13,291) $(17,385)

(in thousands, except per share amounts)Three Months Ended
 July 29,
% of
July 24,
% of
Net Sales$306,317  $321,713  
Cost of sales93,250 30.4%96,322 29.9%
Operating wage and fringe benefit expenses100,698 32.9%104,959 32.6%
Other operating expenses55,642 18.2 %51,589 16.0%
Selling, general and administrative expenses25,455 8.3%40,428 12.6%
Depreciation and amortization expense17,574 5.7%20,153 6.3%
Operating Income13,698 4.5%8,262 2.6%
Net interest expense1,893 0.6%2,606 0.8%
Income Before Income Taxes11,805 3.9%5,656 1.8%
Provision (Benefit) for income taxes2,643 0.9%1,376 0.4%
Net Income$9,162 3.0%$4,280 1.3%
Earnings Per Share — Net Income    
Basic$0.46  $0.19  
Diluted$0.46  $0.19  
Cash Dividends Paid Per Share$0.34  $0.31  
Weighted Average Shares Outstanding    
Basic19,792  22,733  
Dilutive shares172  148  
Diluted19,964  22,881  
Shares outstanding at quarter end19,764  22,352  

Consolidated Balance Sheets
(in thousands, except par values)July 29, 2016 April 29, 2016
Current Assets   
Cash and equivalents$4,402  $12,896 
Accounts receivable, net30,023  28,893 
Inventories25,843  24,997 
Federal and state income taxes receivable4,431   
Prepaid expenses and other current assets11,391  9,307 
Current assets held for sale30,539  31,644 
Total Current Assets106,629  107,737 
Property, plant and equipment1,276,861  1,263,413 
Less accumulated depreciation678,912  665,777 
Net Property, Plant and Equipment597,949  597,636 
Other Assets   
Deposits and other4,449  4,622 
Notes receivable21,564  20,886 
Rabbi trust assets20,943  20,662 
Goodwill and other intangible assets19,790  19,829 
Non-current deferred tax assets28,818  29,002  
Total Other Assets95,564  95,001 
Total Assets$800,142  $800,374 
Liabilities and Stockholders' Equity   
Current Liabilities   
Current portion of long-term debt$3,421  $3,419 
Accounts payable37,599  37,518 
Accrued property, plant and equipment purchases6,186  5,308 
Accrued non-income taxes14,433  15,696 
Accrued wages and related liabilities16,202  26,358 
Self-insurance reserves19,639  20,169 
Deferred gift card revenue12,793  14,147 
Current taxes payable589  9,473 
Current reserve for uncertain tax provision1,481  1,481 
Other accrued expenses26,225  31,988 
Total Current Liabilities138,568   165,557 
Long-Term Liabilities   
Deferred compensation18,143  17,761 
Reserve for uncertain tax positions2,547  2,752 
Deferred rent and other6,153  5,851 
Long-term deferred gain55,571  56,371 
Credit facility borrowings and other long-term debt361,134  335,638 
Total Long-Term Liabilities443,548  418,373 
Stockholders' Equity   
Common stock, $.01 par value; authorized 100,000 shares; issued 42,638 shares at July 29, 2016, and April 29, 2016426  426 
Capital in excess of par value243,758  244,304 
Retained earnings834,676  832,323 
Treasury stock, 22,874 shares at July 29, 2016, and 22,881 shares at April 29, 2016, at cost(860,834) (860,609)
Total Stockholders' Equity218,026  216,444 
Total Liabilities and Stockholders' Equity$800,142  $800,374 

Consolidated Statements of Cash Flows
 Three Months Ended
 July 29, 2016 July 24, 2015
Operating activities:   
Net income$9,162  $4,280 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization17,574  20,153 
Loss (Gain) on disposal of fixed assets276  (701)
(Gain) Loss on rabbi trust assets(281) 169 
Loss (Gain) on deferred compensation279  (138)
Share-based compensation1,440  2,048 
Accretion on long-term note receivable(558) (499)
Deferred income taxes184   
Amortization of deferred financing costs406  418 
Cash provided by (used for) assets and liabilities:       
Accounts receivable(1,130) 664 
Inventories(846) (2,095)
Prepaid expenses and other current assets (2,084) (1,048)
Accounts payable81  7,726 
Federal and state income taxes(13,520) 8,935 
Accrued wages and related liabilities(10,156) (7,160)
Self-insurance(530) 2,392 
Accrued non-income taxes(1,263) 562 
Deferred revenue(1,354) (1,185)
Other assets and liabilities(5,584) 5,624 
Net cash (used in) provided by operating activities(7,904) 40,145 
Investing activities:   
Purchase of property, plant and equipment(18,985) (12,264)
Proceeds from sale of property, plant and equipment2,109  1,597 
Deposits and other(206) (98)
Net cash used in investing activities(17,082) (10,765)
Financing activities:   
Cash dividends paid(6,724) (7,028)
Gross proceeds from credit facility borrowings and other long-term debt97,272  170,739 
Gross repayments of credit facility borrowings and other long-term debt (71,784) (130,768)
Payments of debt issuance costs  (1,705)
Purchase of treasury stock  (60,564)
Proceeds from share-based compensation  165 
Cash paid for taxes on share-based compensation(640)  (617)
Excess tax benefits from share-based compensation(1,632) 104 
Net cash provided by (used in) financing activities16,492  (29,674)
Net decrease in cash and equivalents(8,494) (294)
Cash and equivalents at the beginning of the period12,896  6,358 
Cash and equivalents at the end of the period$4,402  $6,064 

Bob Evans Restaurants same-store sales analysis (18-month core; 521 restaurants)
 Fiscal 2017 Fiscal 2016
 Total Pricing / Mix Transactions Total Pricing / Mix Transactions
May (2.8)%  1.2%  (4.0)%  (0.3)%  3.9%  (4.2)%
June (6.1)%  1.2%  (7.3)%   (0.9)%  4.4%  (5.3)%
July (4.1)%  1.1%  (5.2)%  0.3%   5.8%  (5.5)%
Q1 (4.3)%  1.2%  (5.5)%  (0.3)%  4.8%  (5.0)%
August       (1.3)%  3.3%  (4.6)%
September       (3.8)%  2.9%   (6.6)%
October       (4.4)%  1.5%  (5.8)%
Q2       (3.2 )%  2.5%  (5.7)%
November       (3.2)%  2.5%  (5.6)%
December       (4.3)%  3.4%  (7.7)%
January       (3.4)%  3.1%  (6.5)%
Q3       (3.6)%  2.9%   (6.5)%
February       (1.1)%  0.9%  (2.0)%
March       (2.3)%  2.2%  (4.5)%
April       (4.9)%  1.4%  (6.3)%
Q4       (3.0)%  1.5%  (4.4)%
Fiscal Year (4.3)%  1.2%  (5.5)%  (2.5)%  2.9%  (5.4)%
* Prior year data presentation reflects Company's current same-store sales methodology.

Bob Evans Restaurants same-store sales day part performance
First-quarter Fiscal 2017 SSS% Day Part Performance - Total Chain
Day Part On-Premises Off-Premises Total
Breakfast  (2.0)%  5.8%  (1.2)%
Lunch  (3.6)%  (3.8)%  (3.6)%
Dinner  (8.6)%  (7.2)%  (8.4)%
Total  (4.5)%  (3.2)%   (4.3)%

Bob Evans Restaurants key restaurant sales data
 Bob Evans Restaurants
Average annual store sales ($) - FY16$1.7 million 
Q1 FY2017 day part mix (%): 
Q1 FY2017 dine-in check average per guest ($): 
Q1 FY2017 dine-in check average per guest ($):$9.82 
Q1 FY2017 dine-in check average per ticket ($):$19.23 
Q1 FY2017 carry-out check average per ticket ($):$16.59 

BEF Foods total pounds sold, by category
Fiscal 2017          
Category Q1 Q2 Q3 Q4 YTD
Sides  51.4%        51.4%
Sausage  21.2%        21.2%
Food Service - External  11.6%        11.6%
Food Service - Intersegment  8.3%        8.3%
Frozen  3.9%        3.9%
Other  3.6%        3.6%
Fiscal 2016           
Category Q1 Q2 Q3 Q4 FY 2016
Sides  49.6%  50.7%  50.9%  51.4%  50.7%
Sausage  22.0%  22.3%  26.6%  21.7%  23.3%
Food Service - External  14.1 %  12.5%  10.4%  11.4%  11.9%
Food Service - Intersegment  6.2%  6.6%  6.0%  8.1%  6.7%
Frozen  4.6%  4.5%  3.1%  3.9%  4.0%
Other  3.5%  3.4%  3.0%  3.5%  3.4%



Scott C. Taggart

Vice President, Investor Relations

(614) 492-4954

Source: Bob Evans Farms, Inc.

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