Bob Evans Farms, Inc.
BOB EVANS FARMS INC (Form: 8-K, Received: 03/08/2017 07:13:10)


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): March 8, 2017 (March 8, 2017)
Bob Evans Farms, Inc.
(Exact name of registrant as specified in its charter)

Delaware
0-1667
31-4421866
(State or other jurisdiction of
incorporation or organization)
(Commission File No.)
(I.R.S. Employer
Identification No.)
8111 Smith’s Mill Road, New Albany, Ohio 43054
(Address of principal executive offices Zip Code)
(614) 491-2225
(Registrant’s telephone number, including area code)
Not applicable
(Former name, former address and formal fiscal year, if changed since last report)
_______________________________________________________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2 below):
¨     Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨     Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2b)
¨     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4c)







Item 2.02.      Results of Operations and Financial Condition .

On March 8, 2017, Bob Evans Farms, Inc., a Delaware corporation (the “Company”) issued a news release announcing financial results for the third quarter of fiscal year 2017 ended January 27, 2017. A copy of the news release and a fact sheet with additional financial information is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

Within the news release the Company sets forth the reasons it believes that the presentation of the non-GAAP financial measures contained in the press release provide useful information to investors regarding the Company’s financial condition and results of operations. To the extent material, the exhibit also discloses the additional purposes, if any, for which the Company’s management uses these non-GAAP financial measures. A reconciliation of these non-GAAP financial measures with the most directly comparable GAAP financial measures is included in news release and fact sheet.

The information in this Form 8-K, including the information contained in Exhibit 99.1, is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that Section, nor shall such information be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise expressly set forth by specific reference in such filing.

Item 9.01.      Financial Statements and Exhibits .

(a) Financial Statements of Business Acquired - Not Applicable
(b) Pro Forma Financial Information - Not applicable
(c) Shell Company Transactions - Not Applicable
(d) Exhibits:

The following exhibits are included with this Current Report on Form 8‑K:

99.1
News release issued by Bob Evans Farms, Inc. on March 8, 2017 announcing the financial results for the third quarter of fiscal year 2017 ended January 27, 2017.
Filed herewith













SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
BOB EVANS FARMS, INC.
 
 
 
 
Date: March 8, 2017
 
By:
/s/ Mark E. Hood
 
 
 
Mark E. Hood, Chief Financial Officer and Chief Administrative Officer



BEFLOGOA05.JPG
 
BOB EVANS REPORTS FISCAL 2017 THIRD-QUARTER RESULTS; RAISES FISCAL YEAR 2017 GUIDANCE
    
BEF Foods reports Q3 retail side-dish and sausage pounds sold growth of 13 percent and 3 percent, respectively. Q3 food service volume grew 19 percent

Revenue from continuing operations (1) increases 4.6% to $112.8 million

Company reports Q3 2017 GAAP net income of $0.41 per diluted share, non-GAAP net income (1,3) of $0.75 per diluted share

Completion of Pineland Farms Potato Company acquisition expected by May 1, 2017. $115M acquisition expected to be funded with a new $300 million credit facility. Company expected to target 1.0 to 2.0x leverage following transaction

Previously announced sale of Bob Evans Restaurants to Golden Gate Capital remains on schedule for the end of fiscal 2017. BER segment classified as discontinued operations. Net proceeds of transaction expected to be used for repayment of outstanding indebtedness and payment of a special dividend of approximately $150 million ($7.50 per share) within approximately 60 days following closing

Company raises fiscal year 2017 non-GAAP (2) adjusted diluted EPS guidance range to $2.22 to $2.32, assuming completion of transactions at the end of fiscal 2017

Quarterly dividend of $0.34 per share payable on March 27, 2017, to stockholders of record at the close of business on March 13, 2017. $100 million share repurchase authorization in place through calendar 2017

(1) On January 24, 2017, the Company entered into a definitive agreement with an affiliate of Golden Gate Capital (“GGC”) pursuant to which the Company agreed to sell its Bob Evans Restaurants business. The results of operations of Bob Evans Restaurants (“BER”) have been treated as discontinued operations and all GAAP financial statement items for the current and prior periods reflect BER as a discontinued business. All costs not directly attributable to BER remain in continuing operations. Assets being sold in the transaction include all assets associated with BER as well as our corporate headquarters. All assets being sold and liabilities being assumed by GGC are classified as held for sale on the Company’s consolidated balance sheet.

Adjusted or non-GAAP results presented herein include both continuing and discontinued operations and exclude special items for comparability. Descriptions of measures excluding special items are provided in non-GAAP financial measures and reconciliations of such non-GAAP measures to the most comparable GAAP measures are provided in the tables at the end of this release.

1



(2) The Company is unable to provide GAAP EPS guidance at this time as the Company cannot reliably forecast the timing and magnitude of the gain on the sale of BER, the amount of non-cash costs associated with acceleration of stock based compensation awards and other restructuring, impairment and acquisition and divestiture related costs that may occur, and the income tax effects of these items.

NEW ALBANY, Ohio - March 8, 2017 - Bob Evans Farms, Inc. (NASDAQ: BOBE) today announced its financial results for the fiscal 2017 third quarter ended Friday, January 27, 2017. On a GAAP basis, the Company reported net income of $8.2 million, or $0.41 per diluted share, compared with net income of $12.9 million, or $0.62 per diluted share, in the corresponding period last year. Non-GAAP net income was $15.0 million, or $0.75 per diluted share, compared with net income of $12.9 million, or $0.62 per diluted share, in the corresponding period last year.

Net sales from continuing and discontinued operations in the third quarter totaled $335.9 million and included $112.8 million from continuing operations and $223.1 million from discontinued operations. Total net sales in the prior year period totaled $346.5 million and included $107.9 million from continuing operations and $238.6 million from discontinued operations.

GAAP net income in the third quarter of $8.2 million consists of $9.8 million from continuing operations and a $1.6 million loss from discontinued operations. Non-GAAP net income in the third quarter of $15.0 million includes $10.8 million from continuing operations and $4.2 million from discontinued operations. GAAP and non-GAAP net income in the prior year period of $12.9 million consisted of $6.4 million from continuing operations and $6.5 million from discontinued operations.

GAAP diluted earnings per share in the third quarter of $0.41 consists of $0.49 from continuing operations and a loss of $0.08 from discontinued operations. Non-GAAP diluted earnings per share in the third quarter of $0.75 consists of $0.54 from continuing operations and $0.21 from discontinued operations. GAAP and non-GAAP diluted earnings per share of $0.62 for the prior-year period consisted of $0.31 from continuing operations and $0.31 from discontinued operations.

Third-quarter fiscal 2017 commentary
President and Chief Executive Officer Saed Mohseni said, “BEF Foods achieved year-over-year market share and pounds sold growth in its key product categories and distribution channels. Retail channel pounds sold increased nearly 8 percent, with retail side-dish and sausage gains of approximately 13 percent and 3 percent, respectively, driving market share gains in core and national markets. Food service sales were likewise strong with 19 percent year-over-year pounds sold growth. We expect completion of our acquisition of Pineland Farms Potato Company by May 1, 2017, and look forward to its contribution to continued sales and profit growth of BEF Foods during fiscal year 2018 and beyond.

“As we said on January 24, 2017, when we announced the upcoming sale of Bob Evans Restaurants and the acquisition of Pineland Farms Potato Company, these transactions represent the beginning of a new era at Bob Evans Farms in which the Company will focus on realizing the full potential of its BEF Foods business. We are progressing as expected with the sale of Bob Evans Restaurants to Golden Gate Capital, and expect to complete the transaction at the end of the fourth quarter. The new Bob Evans Farms, further strengthened by the

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manufacturing and intellectual capital of Pineland Farms Potato Company, is positioned to be a higher profit and higher growth company that is expected to provide better returns to shareholders and an enhanced array of products for a growing national customer base.”

Third-quarter fiscal 2017 summary - continuing operations
Net sales from continuing operations were $112.8 million, an increase of $4.9 million, or 4.6 percent, compared to $107.9 million in the corresponding period last year.  Pounds sold increased 7.6 percent while average net selling price per pound declined 2.8 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. From a net sales perspective, a 13.1 percent increase in side-dish pounds sold, a 2.8 percent increase in sausage pounds sold, and a 6.1 percent increase in external food service pounds sold were partially offset by a $1.6 million increase in trade spending (reduces net sales), and a 4.3 percent decline in frozen product pounds sold compared to the corresponding period last year.

GAAP operating income from continuing operations was $17.1 million, compared to $11.4 million last year.  Non-GAAP operating income from continuing operations was $19.5 million, compared to $11.4 million in the corresponding period last year, an improvement of $8.1 million.  The improvement was due primarily to the aforementioned increase in pounds sold, the favorable sales mix of higher-margin side dish items, lower SG&A costs, and $1.2 million of lower net sow costs; partially offset by increased advertising expense, and increased freight expense resulting from increased pounds sold. SG&A expenses totaling $5.8 million ($17.2 million year-to-date), previously identified as “corporate and other” costs, are now included within continuing operations. Of these costs, $2.0 million ($5.8 million year-to-date) represent costs primarily related to wages and benefits for terminated employees that will no longer be in the Company’s expense base in fiscal 2018.

Third-quarter fiscal 2017 summary - discontinued operations
The Company has classified the results of operations, impairment charges and separation costs related to BER as discontinued operations.

Net sales from discontinued operations were $223.1 million, a decline of $15.5 million, or 6.5 percent, compared to net sales of $238.6 million in the corresponding period last year. Same-store sales declined 2.6 percent with the balance of the net sales decline due to net restaurant closures during the past year. No restaurants were closed and one restaurant opened during the quarter.  The Company operated 523 restaurants at the end of the quarter.

Same-Store Sales (SSS) Restaurants
November
December
January
Q3  FY ’17
521
-1.2%
-6.7%
0.0%
-2.6%

GAAP pretax loss from discontinued operations was $4.6 million, compared to GAAP pretax income from discontinued operations of $6.6 million last year.  Non-GAAP pretax income from discontinued operations was $2.5 million, compared to $6.6 million last year, a decline of $4.1 million.  The decline in non-GAAP pretax income from discontinued operations was due to lower sales and increased hourly wage rates and investment in labor hours to support efforts to improve guest hospitality; partially offset by lower commodity costs, lower healthcare costs and reduced discounting. 


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Third-quarter fiscal 2017 net interest expense - GAAP and non-GAAP net interest expense from continuing operations was $2.1 million in the third quarter, a decline of $0.3 million, compared to $2.4 million in the corresponding period last year. The borrowing rate on the Company’s outstanding debt was 2.52 percent at the end of the third quarter, compared to 2.18 percent for the prior year period. All borrowings are included in continuing operations; interest related to the headquarters mortgage is included within discontinued operations.

Third-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 for continuing operations of 34.3 percent for the third quarter of fiscal 2017, as compared to 29.2 percent for the prior year period. The change in the tax rate was driven primarily by the yearly variances in the forecasted annual tax rate related to officer’s life insurance and the domestic productions activities deduction. Year-to-date, the Company recognized GAAP tax expense for continuing operations of 34.3 percent, compared to 31.0 percent for the prior year. For non-GAAP items, the tax rate was 37.7 percent for continuing operations, reflecting the Company’s non-GAAP annual estimated tax rate adjusted for the impact of third quarter discrete items. Year-to-date, the Company’s non-GAAP estimated tax rate for continuing operations adjusted for the impact of discrete items was 35.4 percent. Discontinued operations are presented net of income tax expense or benefit.

Third-quarter fiscal 2017 balance sheet highlights - The Company’s cash balance and outstanding debt at the end of the quarter were $2.4 million and $330.1 million, respectively, compared to $6.3 million and $496.0 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 2.66 .

Fiscal year 2017 outlook
Chief Administrative and Chief Financial Officer Mark Hood said, “We have raised our consolidated non-GAAP diluted earnings per share range to $2.22 to $2.32, from $2.15 to $2.30 per share previously, to reflect the impact of lower net sow costs and continued focus on operating efficiency. We are unable to provide GAAP EPS guidance at this time as the Company cannot reliably forecast the timing and magnitude of the gain on the sale of BER, the amount of non-cash costs associated with acceleration of stock based compensation awards and other restructuring, impairment and acquisition and divestiture related costs that may occur, and the income tax effects of these items. Remaining guidance items are presented for continuing operations. The sale of BER , acquisition of Pineland Farms Potato Company, and establishment of our new credit facility remain on-track for completion.”


4


Guidance Metric
FY ‘17
BEF Foods net sales
$390 to $410 million
BEF Foods sow cost (per hundredweight)
$41-$44
Capital expenditures - continuing operations
$30 to $35 million
Depreciation and amortization - continuing operations
$28 to $30 million
Net interest expense
$9 to $10 million (excluding mortgage interest included in discontinued operations)
Non-GAAP Tax rate - continuing operations
35% to 36%
Diluted weighted-average share count
approximately 20 million shares
Share repurchase authorization
$100 million
Non-GAAP diluted earnings per share - consolidated
$2.22 to $2.32
 
 

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 third-quarter fiscal 2017 results at 8:30 a.m. (ET) on Wednesday, March 8, 2017. The dial-in number for the conference call is (855) 468-0551, access code 69455359. A replay will be available at (800) 585-8367, access code 69455358.

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

(3) Non-GAAP Financial Measures
Our non-GAAP measures are used by analysts, investors and other interested parties to compare our performance with the performance of other companies that report similar non-GAAP measures. We believe these non-GAAP measures provide meaningful supplemental information regarding financial performance by excluding certain expenses and benefits that may not be indicative of core business operating results. We believe the non-GAAP measures, when viewed in conjunction with U.S. GAAP results and the accompanying reconciliations, enhance the comparability of results against prior periods and allow for greater transparency of financial results and business outlook. In addition, we use non-GAAP data internally to assess performance and facilitate management's internal comparison of our financial performance to that of prior periods, as well as trend analysis for budgeting and planning purposes. The presentation of our non-GAAP measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP. Furthermore, our non-GAAP measures may not be comparable to similarly titled measures reported by other companies and may have limitations as an analytical tool.

Reconciliations of the Company’s projected adjusted diluted EPS for fiscal year 2017 and the most directly comparable GAAP financial measures are omitted from this release because the Company is unable to provide such reconciliations without unreasonable effort. In particular, in light of the pending transactions referenced in this release, management is not able to calculate certain amounts necessary to provide corresponding forecasted financial measures calculated in accordance with GAAP and related reconciliations at this time as the Company cannot reliably forecast the timing and magnitude of the gain on the sale of BER, the amount of non-cash costs associated with acceleration of stock based compensation awards and other restructuring,

5


impairment and acquisition and divestiture related costs that may occur, and the income tax effects of these items.

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. The risks and uncertainties in connection with such forward-looking statements related to the proposed transactions include, but are not limited to, the occurrence of any event, change or other circumstances that could delay the closing of either the sale of BER or the acquisition of Pineland Farms; the possibility of non-consummation of the proposed transactions and the termination of the respective transaction agreements; the failure to satisfy any of the conditions to the respective transaction agreements; adverse effects on the Company’s common stock because of the failure to complete either of the proposed transactions; the Company’s businesses experiencing disruptions due to transaction-related uncertainty or other factors making it more difficult to maintain relationships with employees and business partners; significant transaction costs related to the proposed transactions; and the dependence on the proposed special dividend following the consummation of the sale of BER. Additional information about the factors and events that could cause actual results to differ materially from those predicted by the forward looking statements, along with certain other risks, uncertainties and assumptions related to the Company and its business, may be found in our Annual Report on Form 10-K for the fiscal year ended April 29, 2016, our Quarterly Report on Form 10-Q for the quarter ended January 27, 2017, 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., through its BEF Foods segment, is 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. Bob Evans Farms, Inc. also owns and operates full-service restaurants under the Bob Evans Restaurants brand name. At the end of the third fiscal quarter (January 27, 2017), Bob Evans Restaurants owned and operated 523 family restaurants in 18 states, primarily in the Midwest, mid-Atlantic and Southeast regions of the United States. The Company announced a definitive agreement for the sale of Bob Evans Restaurants in a press release dated January 24, 2017. For more information about Bob Evans Farms, Inc., visit www.bobevans.com .

Contact:     
Scott C. Taggart
Vice President, Investor Relations
(614) 492-4954
BOBE-E
Source: Bob Evans Farms, Inc.

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Bob Evans Farms, Inc.
Earnings Release Fact Sheet (unaudited)
Third quarter Fiscal 2017, Three months ended January 27, 2017 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
 
January 27, 2017
 
January 22, 2016
 
January 27, 2017
 
January 22, 2016
 
January 27, 2017
 
January 22, 2016
Operating Income (Loss) as Reported
 
 
 
 
 
 
 
 
 
 
 
Operating Income
$
17,121

 
$
11,424

 
 
 
 
 
 
 
 
Net interest expense
2,139

 
2,367

 
 
 
 
 
 
 
 
Income Before Taxes from Continuing Operations
14,982

 
9,057

 
 
 
 
 
 
 
 
Provision for income taxes from continuing operations
5,144

 
2,641

 
 
 
 
 
 
 
 
Net Income as reported from continuing operations
9,838

 
6,416

 
$
0.50

 
$
0.31

 
$
0.49

 
$
0.31

 
 
 
 
 
 
 
 
 
 
 
 
(Loss) / Income before taxes from discontinued operations
(4,567
)
 
6,636

 
 
 
 
 
 
 
 
(Benefit) / Provision for income taxes from discontinued operations
(2,950
)
 
121

 
 
 
 
 
 
 
 
(Loss) / Income from discontinued operations as reported
(1,617
)
 
6,515

 
$
(0.09
)
 
$
0.31

 
$
(0.08
)
 
$
0.31

 
 
 
 
 
 
 
 
 
 
 
 
Net income as reported
8,221

 
12,931

 
$
0.41

 
$
0.62

 
$
0.41

 
$
0.62

 
 
 
 
 
 
 
 
 
 
 
 
Adjustments to Continuing Operations
 
 
 
 
 
 
 
 
 
 
 
Severance/Restructuring
2,559

 

 
 
 
 
 
 
 
 
Legal and professional fees
571

 
 
 
 
 
 
 
 
 
 
Reserve on note receivable
(744
)
 

 
 
 
 
 
 
 
 
Total Adjustments to Continuing Operations
2,386

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments to Discontinued Operations
 
 
 
 
 
 
 
 
 
 
 
Legal and professional fees
5,221

 

 
 
 
 
 
 
 
 
Termination benefits
1,842

 

 
 
 
 
 
 
 
 
Total Adjustments to Discontinued Operations
7,063

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP Operating Income from Continuing Operations
19,507

 
11,424

 
 
 
 
 
 
 
 
Non-GAAP net interest expense
2,139

 
2,367

 
 
 
 
 
 
 
 
Non-GAAP income before taxes from continuing operations
17,368

 
9,057

 
 
 
 
 
 
 
 
Adjustments to tax expense from continuing operations
1,400

 
31

 
 
 
 
 
 
 
 
Non-GAAP provision for income taxes from continuing operations
6,544

 
2,672

 
 
 
 
 
 
 
 
Non-GAAP net income from continuing operations
10,824

 
6,385

 
$
0.55

 
$
0.31

 
$
0.54

 
$
0.31

 

 

 
 
 
 
 
 
 
 
Non-GAAP income before taxes from discontinued operations
2,496

 
6,636

 
 
 
 
 
 
 
 
Adjustments to tax expense from discontinued operations
1,273

 
(31
)
 
 
 
 
 
 
 
 
Non-GAAP (benefit) provision for income taxes from discontinued operations
(1,677
)
 
90

 
 
 
 
 
 
 
 
Non-GAAP net income from discontinued operations
4,173

 
6,546

 
$
0.21

 
$
0.31

 
$
0.21

 
$
0.31

 

 

 
 
 
 
 
 
 
 
Non-GAAP net income
$
14,997

 
$
12,931

 
$
0.76

 
$
0.62

 
$
0.75

 
$
0.62

 
 
 
 
 
 
 
 
 
 
 
 
Weighted Average Shares Outstanding
 
 
 
 
19,847

 
20,692

 
20,068

 
20,803



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Third quarter Fiscal 2017, Three months ended January 27, 2017 compared to the corresponding period a year ago:
(in thousands)
 
 
 
 
Three Months Ended
 
 
January 27, 2017
 
% of Sales
 
January 22, 2016
 
% of Sales
Operating Income from Continuing Operations, as reported
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
$
112,820

 
 
 
$
107,897

 
 
Cost of sales
 
48,933

 
43.4
 %
 
52,326

 
48.5
%
Operating wage and fringe benefit expenses
 
11,150

 
9.9
 %
 
10,822

 
10.0
%
Other operating expenses
 
15,826

 
14.0
 %
 
12,846

 
11.9
%
Selling, general and administrative expenses
 
14,201

 
12.6
 %
 
15,453

 
14.3
%
Depreciation and amortization expense
 
6,333

 
5.6
 %
 
5,026

 
4.7
%
Impairments
 
(744
)
 
(0.7
)%
 

 
%
Total operating income as reported
 
17,121

 
15.2
 %
 
11,424

 
10.6
%
 
 
 
 
 
 
 
 
 
Non-GAAP Adjustments to Continuing Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 

 
 
 

 
 
Cost of sales
 

 
 
 

 
 
Operating wage and fringe benefit expenses
 

 
 
 

 
 
Other operating expenses
 

 
 
 

 
 
Selling, general and administrative expenses
 
(3,130
)
 
 
 

 
 
Depreciation and amortization expense
 

 
 
 

 
 
Impairments
 
744

 
 
 

 
 
Total Adjustments
 
2,386

 
 
 

 
 
 
 
 
 
 
 
 
 
 
Non-GAAP Operating Income from Continuing Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
112,820

 
 
 
107,897

 
 
Cost of sales
 
48,933

 
43.4
 %
 
52,326

 
48.5
%
Operating wage and fringe benefit expenses
 
11,150

 
9.9
 %
 
10,822

 
10.0
%
Other operating expenses
 
15,826

 
14.0
 %
 
12,846

 
11.9
%
Selling, general and administrative expenses
 
11,071

 
9.8
 %
 
15,453

 
14.3
%
Depreciation and amortization expense
 
6,333

 
5.6
 %
 
5,026

 
4.7
%
Impairments
 

 
 %
 

 
%
Total non-GAAP operating income
 
$
19,507

 
17.3
 %
 
$
11,424

 
10.6
%




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Bob Evans Farms, Inc.
Earnings Release Fact Sheet (unaudited)
Third quarter Fiscal 2016, nine months ended January 27, 2017 , compared to the corresponding period a year ago:
(in thousands, except per share amounts)
 
 
 
 
Basic EPS
 
Diluted EPS
 
Nine Months Ended
 
Nine Months Ended
 
Nine Months Ended
 
January 27, 2017
 
January 22, 2016
 
January 27, 2017
 
January 22, 2016
 
January 27, 2017
 
January 22, 2016
Operating Income (Loss) as Reported
 
 
 
 
 
 
 
 
 
 
 
Operating Income
$
20,618

 
$
22,741

 
 
 
 
 
 
 
 
Net interest expense
4,961

 
7,856

 
 
 
 
 
 
 
 
Income Before Taxes from Continuing Operations
15,657

 
14,885

 
 
 
 
 
 
 
 
Provision for income taxes from continuing operations
5,377

 
4,608

 
 
 
 
 
 
 
 
Net Income as reported from continuing operations
10,280

 
10,277

 
$
0.52

 
$
0.47

 
$
0.51

 
$
0.47

 
 
 
 
 
 
 
 
 
 
 
 
Income before taxes from discontinued operations
6,290

 
15,016

 
 
 
 
 
 
 
 
(Benefit) / Provision for Income taxes from discontinued operations
(1,033
)
 
1,651

 
 
 
 
 
 
 
 
Income from discontinued operations as reported
7,323

 
13,365

 
$
0.37

 
$
0.61

 
$
0.37

 
$
0.61

 
 
 
 
 
 
 
 
 
 
 
 
Net income as reported
17,603

 
23,642

 
$
0.89

 
$
1.08

 
$
0.88

 
$
1.08

 
 
 
 
 
 
 
 
 
 
 
 
Adjustments to Continuing Operations
 
 
 
 
 
 
 
 
 
 
 
Severance/Restructuring
2,728

 

 
 
 
 
 
 
 
 
Reserve on note receivable
15,256

 

 
 
 
 
 
 
 
 
Legal and professional fees
571

 
 
 
 
 
 
 
 
 
 
Loss on sale of assets

 
3,606

 
 
 
 
 
 
 
 
Accretion income on note receivable
(1,133
)
 

 
 
 
 
 
 
 
 
Write off of unamortized debt costs

 
480

 
 
 
 
 
 
 
 
Total Adjustments to Continuing Operations
17,422

 
4,086

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments to Discontinued Operations
 
 
 
 
 
 
 
 
 
 
 
Legal and professional fees
5,532

 

 
 
 
 
 
 
 
 
Termination benefits
1,842

 
318

 
 
 
 
 
 
 
 
Store closure costs
807

 

 
 
 
 
 
 
 
 
Litigation settlement costs
(278
)
 
10,500

 
 
 
 
 
 
 
 
Total Adjustments to Discontinued Operations
7,903

 
10,818

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP Operating Income from Continuing Operations
39,173

 
26,347

 
 
 
 
 
 
 
 
Non-GAAP net interest expense
6,094

 
7,376

 
 
 
 
 
 
 
 
Non-GAAP income before taxes from continuing operations
33,079

 
18,971

 
 
 
 
 
 
 
 
Adjustments to tax expense from continuing operations
6,335

 
1,501

 
 
 
 
 
 
 
 
Non-GAAP provision for income taxes from continuing operations
11,712

 
6,109

 
 
 
 
 
 
 
 
Non-GAAP net income from continuing operations
21,367

 
12,862

 
$
1.08

 
$
0.59

 
$
1.07

 
$
0.58

 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP income before taxes from discontinued operations
14,193

 
25,834

 
 
 
 
 
 
 
 
Adjustments to tax expense from discontinued operations
859

 
3,211

 
 
 
 
 
 
 
 
Non-GAAP (benefit) provision for income taxes from discontinuing operations
(174
)
 
4,862

 
 
 
 
 
 
 
 
Non-GAAP net income from discontinued operations
14,367

 
20,972

 
$
0.72

 
$
0.96

 
$
0.71

 
$
0.96

 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP net income
$
35,734

 
$
33,834

 
$
1.80

 
$
1.55

 
$
1.78

 
$
1.54

 
 
 
 
 
 
 
 
 
 
 
 
Weighted Average Shares Outstanding
 
 
 
 
19,836

 
21,845

 
20,055

 
21,989


9



Third quarter Fiscal 2016, nine months ended January 27, 2017 , compared to the corresponding period a year ago:
(in thousands)
 
 
Nine Months Ended
 
January 27, 2017
 
% of Sales
 
January 22, 2016
 
% of Sales
Operating income from Continuing Operations, as reported
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Sales
$
294,919

 
 
 
$
285,221

 
 
Cost of sales
127,171

 
43.1
%
 
128,164

 
44.9
%
Operating wage and fringe benefit expenses
31,132

 
10.6
%
 
31,198

 
10.9
%
Other operating expenses
44,372

 
15.0
%
 
37,640

 
13.2
%
Selling, general and administrative expenses
39,179

 
13.3
%
 
49,512

 
17.4
%
Depreciation and amortization expense
17,191

 
5.8
%
 
15,966

 
5.6
%
Impairments
15,256

 
5.2
%
 

 
%
Total as reported
$
20,618

 
7.0
%
 
$
22,741

 
8.0
%
 
 
 
 
 
 
 
 
Non-GAAP Adjustments to Continuing Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Sales

 
 
 

 
 
Cost of sales

 
 
 

 
 
Operating wage and fringe benefit expenses

 
 
 

 
 
Other operating expenses

 
 
 

 
 
Selling, general and administrative expenses
(3,299
)
 
 
 
(3,606
)
 
 
Depreciation and amortization expense

 
 
 

 
 
Impairments
(15,256
)
 
 
 

 
 
Total Adjustments
18,555

 
 
 
3,606

 
 
 
 
 
 
 
 
 
 
Non-GAAP Operating Income from Continuing Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Sales
294,919

 
 
 
285,221

 
 
Cost of sales
127,171

 
43.1
%
 
128,164

 
44.9
%
Operating wage and fringe benefit expenses
31,132

 
10.6
%
 
31,198

 
10.9
%
Other operating expenses
44,372

 
15.0
%
 
37,640

 
13.2
%
Selling, general and administrative expenses
35,880

 
12.2
%
 
45,906

 
16.2
%
Depreciation and amortization expense
17,191

 
5.8
%
 
15,966

 
5.6
%
Impairments

 
%
 

 
%
Total non-GAAP operating income
$
39,173

 
13.3
%
 
$
26,347

 
9.2
%


Non-GAAP Financial Measures

Our non-GAAP measures are used by analysts, investors and other interested parties to compare our performance with the performance of other companies that report similar non-GAAP measures. We believe these non-GAAP measures provide meaningful supplemental information regarding financial performance by excluding certain expenses and benefits that may not be indicative of core business operating results. We believe the non-GAAP measures, when viewed in conjunction with U.S. GAAP results and the accompanying reconciliations, enhance the comparability of results against prior periods and allow for greater transparency of financial results and business outlook. In addition, we use non-GAAP data internally to assess performance and facilitate management's internal comparison of our financial performance to that of prior periods, as well as trend analysis for budgeting and planning purposes. The presentation of our non-GAAP measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP. Furthermore, our non-GAAP measures may not be comparable to similarly titled measures reported by other companies and may have limitations as an analytical tool.

Reconciliations of the Company’s projected adjusted diluted EPS for fiscal year 2017 and the most directly comparable GAAP financial measures are omitted from this release because the Company is unable to provide such reconciliations without unreasonable effort. In particular, in light of the pending transactions referenced in this release, management is not able to calculate certain amounts necessary to provide corresponding forecasted financial measures calculated in accordance with GAAP and related reconciliations at this time as the Company cannot reliably forecast the timing and magnitude of the gain on the sale of BER, the amount of non-cash costs associated with acceleration of stock based compensation awards and other restructuring, impairment and acquisition and divestiture related costs that may occur, and the income tax effects of these items.

10



Consolidated Statements of Net Income
 
Three Months Ended
 
Nine Months Ended
 
January 27, 2017
 
January 22, 2016
 
January 27, 2017
 
January 22, 2016
Net Sales
$
112,820

 
$
107,897

 
$
294,919

 
$
285,221

Cost of sales
48,933

 
52,326

 
127,171

 
128,164

Operating wage and fringe benefit expenses
11,150

 
10,822

 
31,132

 
31,198

Other operating expenses
15,826

 
12,846

 
44,372

 
37,640

Selling, general and administrative expenses
14,201

 
15,453

 
39,179

 
49,512

Depreciation and amortization expense
6,333

 
5,026

 
17,191

 
15,966

Impairments
(744
)
 

 
15,256

 

Operating Income
17,121

 
11,424

 
20,618

 
22,741

Net interest expense
2,139

 
2,367

 
4,961

 
7,856

Income from Continuing Operations Before Income Taxes
14,982

 
9,057

 
15,657

 
14,885

       Provision for income taxes
5,144

 
2,641

 
5,377

 
4,608

Income from Continuing Operations
9,838

 
6,416

 
10,280

 
10,277

(Loss) Income from Discontinued Operations, net of Income Taxes
(1,617
)
 
6,515

 
7,323

 
13,365

Net Income
$
8,221

 
$
12,931

 
$
17,603

 
$
23,642

 
 
 
 
 
 
 
 
Earnings Per Share — Income from Continuing Operations
 
 
 
 
 
 
 
Basic
$
0.50

 
$
0.31

 
$
0.52

 
$
0.47

Diluted
$
0.49

 
$
0.31

 
$
0.51

 
$
0.47

 
 
 
 
 
 
 
 
Earnings Per Share — (Loss) Income from Discontinued Operations
 
 
 
 
 
 
 
Basic
$
(0.09
)
 
$
0.31

 
$
0.37

 
$
0.61

Diluted
$
(0.08
)
 
$
0.31

 
$
0.37

 
$
0.61

 
 
 
 
 
 
 
 
Earnings Per Share — Net Income
 
 
 
 
 
 
 
Basic
$
0.41

 
$
0.62

 
$
0.89

 
$
1.08

Diluted
$
0.41

 
$
0.62

 
$
0.88

 
$
1.08

 
 
 
 
 
 
 
 
Cash Dividends Paid Per Share
$
0.34

 
$
0.34

 
$
1.02

 
$
0.96

 
 
 
 
 
 
 
 
Weighted Average Shares Outstanding
 
 
 
 
 
 
 
Basic
19,847

 
20,692

 
19,836

 
21,845

Dilutive shares
221

 
111

 
219

 
144

Diluted
20,068

 
20,803

 
20,055

 
21,989



11



Consolidated Balance Sheets
 
Unaudited
January 27, 2017
 
April 29, 2016
Assets
Current Assets
 
 
 
Cash and equivalents
$
2,430

 
$
11,609

Accounts receivable, net
29,258

 
24,613

Inventories
19,455

 
17,093

Federal and state income taxes receivable
9,338

 

Prepaid expenses and other current assets
3,967

 
5,716

Current assets held for sale
499,943

 
48,707

Total Current Assets
564,391

 
107,738

Property, plant and equipment
236,855

 
219,103

Less accumulated depreciation
103,505

 
89,851

Net Property, Plant and Equipment
133,350

 
129,252

Other Assets

 

Deposits and other
2,518

 
3,841

Notes receivable, net

 
20,886

Rabbi trust assets
21,540

 
20,662

Goodwill and other intangible assets
19,712

 
19,829

Non-current deferred tax assets
24,878

 
29,002

Non-current assets held for sale

 
469,164

Total Other Assets
68,648

 
563,384

Total Assets
$
766,389

 
$
800,374

Liabilities and Stockholders’ Equity
Current Liabilities
 
 
 
Current portion of long-term debt
$
3,425

 
$
3,419

Accounts payable
14,941

 
15,841

Accrued property, plant and equipment purchases
1,743

 
4,024

Accrued non-income taxes
11,040

 
14,474

Accrued wages and related liabilities
12,830

 
16,370

Self-insurance reserves
9,263

 
11,288

Current taxes payable

 
9,473

Current reserve for uncertain tax provision
1,481

 
1,481

Other accrued expenses
15,566

 
13,280

Current liabilities held for sale
128,764

 
75,907

Total Current Liabilities
199,053

 
165,557

Long-Term Liabilities
 
 
 
Deferred compensation
18,147

 
17,761

Reserve for uncertain tax positions
2,392

 
2,752

Other non-current liabilities
921

 
377

Long-term deferred gain
2,252

 
2,432

Credit facility borrowings and other long-term debt
326,626

 
335,638

Non-current liabilities held for sale

 
59,413

Total Long-Term Liabilities
350,338

 
418,373

Stockholders’ Equity
 
 
 
Common stock, $.01 par value; authorized 100,000 shares; issued 42,638 shares at January 27, 2017, and April 29, 2016
426

 
426

Capital in excess of par value
248,144

 
244,304

Retained earnings
829,356

 
832,323

Treasury stock, 22,869 shares at January 27, 2017, and 22,881 shares at April 29, 2016, at cost
(860,928
)
 
(860,609
)
Total Stockholders’ Equity
216,998

 
216,444

Total Liabilities and Stockholders' Equity
$
766,389

 
$
800,374


12




Consolidated Statements of Cash Flows
 
Nine Months Ended
 
January 27, 2017
 
January 22, 2016
Operating activities:
 
 
 
Net income
$
17,603

 
$
23,642

Income from discontinued operations
7,323

 
13,365

Income from continuing operations
10,280

 
10,277

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
17,191

 
15,966

Impairments
15,256

 

Loss on disposal of fixed assets
34

 
3,439

(Gain) Loss on rabbi trust assets
(878
)
 
1,768

Loss (Gain) on deferred compensation
1,433

 
(1,146
)
Share-based compensation
3,151

 
2,235

Accretion on long-term note receivable
(1,133
)
 
(1,539
)
Deferred income taxes
4,124

 
(136
)
Amortization of deferred financing costs
1,033

 
1,762

Cash provided by (used for) assets and liabilities:
 
 
 
Accounts receivable
(4,645
)
 
(3,405
)
Inventories
(2,362
)
 
2,532

Prepaid expenses and other current assets
1,749

 
1,162

Accounts payable
(900
)
 
(970
)
Federal and state income taxes
(19,171
)
 
19,119

Accrued wages and related liabilities
(3,540
)
 
2,956

Self-insurance
(2,025
)
 
2,312

Accrued non-income taxes
(3,434
)
 
2,005

Other assets and liabilities
8,330

 
4,395

Net cash provided by operating activities
24,493

 
62,732

Investing activities:
 
 
 
Purchase of property, plant and equipment
(23,669
)
 
(23,989
)
Proceeds from sale of property, plant and equipment
95

 
50,539

Liquidation of rabbi trust assets

 
5,245

Deposits and other
371

 
(566
)
Net cash (used in) provided by investing activities
(23,203
)
 
31,229

Financing activities:
 
 
 
Cash dividends paid
(20,182
)
 
(21,132
)
Gross proceeds from credit facility borrowings and other long-term debt
277,894

 
506,626

Gross repayments of credit facility borrowings and other long-term debt
(286,964
)
 
(461,668
)
Payments of debt issuance costs

 
(2,517
)
Purchase of treasury stock

 
(156,654
)
Proceeds from share-based compensation

 
214

Cash paid for taxes on share-based compensation
(702
)
 
(1,177
)
Excess tax benefits from share-based compensation
(1,688
)
 
84

Net cash used in financing activities
(31,642
)
 
(136,224
)
Net cash used in operations
(30,352
)
 
(42,263
)
Net cash provided by operating activities of discontinued operations
36,565

 
54,781

Net cash used in investing activities of discontinued operations
(15,392
)
 
(11,165
)
Net cash provided by discontinued operations
21,173

 
43,616

Cash and equivalents at the beginning of the period
11,609

 
4,994

Cash and equivalents at the end of the period
$
2,430

 
$
6,347


13




Consolidated Results for Continuing and Discontinued Operations
(in thousands except earnings per share amounts)
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
GAAP Consolidated Results
 
January 27, 2017
 
January 22, 2016
 
% Change
 
January 27, 2017
 
January 22, 2016
 
% Change
Net Sales from Continuing Operations
 
$
112,820

 
$
107,897

 
4.6
 %
 
$
294,919

 
$
285,221

 
3.4
 %
Net Sales from Discontinued Operations
 
223,126

 
238,608

 
(6.5
)%
 
663,307

 
708,018

 
(6.3
)%
Total Net Sales
 
$
335,946

 
$
346,505

 
(3.0
)%
 
$
958,226

 
$
993,239

 
(3.5
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Margin from Continuing Operations
 
15.2
 %
 
10.6
%
 
460 bps

 
7.0
%
 
8.0
%
 
(100 bps)

Operating Margin from Discontinued Operations
 
(1.9
)%
 
2.8
%
 
(470 bps)

 
1.1
%
 
2.1
%
 
(100 bps)

Total Operating Margin
 
3.9
 %
 
5.2
%
 
(130 bps)

 
2.9
%
 
3.8
%
 
(90 bps)

 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted EPS from Continuing Operations
 
$
0.49

 
$
0.31

 
58.1
 %
 
$
0.51

 
$
0.47

 
8.5
 %
Diluted EPS from Discontinued Operations
 
$
(0.08
)
 
$
0.31

 
(125.8
)%
 
$
0.37

 
$
0.61

 
(39.3
)%
Diluted EPS
 
$
0.41

 
$
0.62

 
(33.9
)%
 
$
0.88

 
$
1.08

 
(18.5
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP Adjustments
 
 
 
 
 
 
 
 
 
 
 
 
Net Sales from Continuing Operations
 
$

 
$

 
 %
 
$

 
$

 
 %
Net Sales from Discontinued Operations
 

 

 
 %
 

 

 
 %
Total Net Sales
 
$

 
$

 
 %
 
$

 
$

 
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Margin from Continuing Operations
 
2.1
 %
 
%
 

 
6.3
%
 
1.3
%
 

Operating Margin from Discontinued Operations
 
3.2
 %
 
%
 

 
1.2
%
 
1.5
%
 

Total Operating Margin
 
2.8
 %
 
%
 

 
2.8
%
 
1.5
%
 

 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted EPS from Continuing Operations
 
$
0.05

 
$

 
 %
 
$
0.56

 
$
0.11

 
 %
Diluted EPS from Discontinued Operations
 
$
0.29

 
$

 
 %
 
$
0.34

 
$
0.35

 
 %
Diluted EPS
 
$
0.34

 
$

 
 %
 
$
0.90

 
$
0.46

 
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP Consolidated Results
 
 
 
 
 
 
 
 
 
 
 
 
Net Sales from Continuing Operations
 
$
112,820

 
$
107,897

 
4.6
 %
 
$
294,919

 
$
285,221

 
3.4
 %
Net Sales from Discontinued Operations
 
223,126

 
238,608

 
(6.5
)%
 
663,307

 
708,018

 
(6.3
)%
Total Net Sales
 
$
335,946

 
$
346,505

 
(3.0
)%
 
$
958,226

 
$
993,239

 
(3.5
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Margin from Continuing Operations
 
17.3
 %
 
10.6
%
 
670 bps

 
13.3
%
 
9.2
%
 
410 bps

Operating Margin from Discontinued Operations
 
1.3
 %
 
2.8
%
 
(150 bps)

 
2.3
%
 
3.6
%
 
(130 bps)

Total Operating Margin
 
6.7
 %
 
5.2
%
 
150 bps

 
5.7
%
 
5.3
%
 
40 bps

 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted EPS from Continuing Operations
 
$
0.54

 
$
0.31

 
74.2
 %
 
$
1.07

 
$
0.58

 
84.5
 %
Diluted EPS from Discontinued Operations
 
$
0.21

 
$
0.31

 
(32.3
)%
 
$
0.71

 
$
0.96

 
(26.0
)%
Diluted EPS
 
$
0.75

 
$
0.62

 
21.0
 %
 
$
1.78

 
$
1.54

 
15.6
 %


14



BEF Foods total pounds sold, by category
 
 
 
 
 
 
Fiscal 2017
 
 
 
 
 
 
 
 
 
 
Category
 
Q1
 
Q2
 
Q3
 
Q4
 
YTD
Sides
 
51.4%
 
52.5%
 
52.5%
 
 
 
52.2%
Sausage
 
21.2%
 
21.9%
 
24.9%
 
 
 
22.9%
Food Service - External
 
11.6%
 
10.7%
 
10.1%
 
 
 
10.7%
Food Service - Sales to discontinued operations
 
8.3%
 
9.0%
 
7.7%
 
 
 
8.3%
Frozen
 
3.9%
 
3.4%
 
2.7%
 
 
 
3.3%
Other
 
3.6%
 
2.5%
 
2.1%
 
 
 
2.6%
 
 
 
 
 
 
 
 
 
 
 
Fiscal 2016
 
 
 
 
 
 
 
 
 
 
Category
 
Q1
 
Q2
 
Q3