Bob Evans Farms, Inc.
BOB EVANS FARMS INC (Form: 8-K, Received: 12/06/2017 08:40:33)



 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
 

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

Date of Report (Date of earliest event reported): December 6, 2017 (December 6, 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 December 6, 2017, Bob Evans Farms, Inc., a Delaware corporation (the “Company”) issued a news release announcing financial results for the second quarter of fiscal year 2018 ended October 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:














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: December 6, 2017
 
By:
/s/ Mark E. Hood
 
 
 
Mark E. Hood, Chief Financial Officer and Chief Administrative Officer



BEFLOGOA17.JPG

BOB EVANS REPORTS SECOND QUARTER FY 2018 RESULTS
    
Net sales increase 22.3 percent to $117.6 million compared to $96.2 million 1 in the comparable period in fiscal 2017; net sales increased 6.2 percent excluding Pineland net sales and sales to Bob Evans Restaurants (now 3 rd party);

Retail side-dish and sausage pounds-sold increased 15.9 percent (excluding Pineland) and 4.5 percent, respectively, when compared to the comparable period last year;

GAAP net income of $0.11 per diluted share compared to net loss per share of $0.21 1 in the prior year. Non-GAAP net income of $0.35 per diluted share, an increase of 16.7 percent compared to $0.30 1 in the prior year;

Adjusted EBITDA decreased 1.9 percent to $17.7 million as compared to $18.0 million 1 in the comparable period in fiscal 2017;

On September 18, 2017, the Company and Post Holdings entered into a definitive agreement in which Post will acquire Bob Evans for $77 per share.

Quarterly dividend of $0.34 per share payable on December 22, 2017, to stockholders of record at the close of business on December 11, 2017.

1 All references to the prior year period refer to results from continuing operations for the second quarter of fiscal 2017

Descriptions of measures excluding certain items are provided in "Adjusted EBITDA and other non-GAAP financial measures" below and reconciliations of such non-GAAP measures to the most comparable GAAP measure are provided in the tables at the end of this release

NEW ALBANY, Ohio - December 6, 2017 - Bob Evans Farms, Inc. (NASDAQ: BOBE) today announced its financial results for the fiscal 2018 second quarter ended October 27, 2017. On a GAAP basis, the Company reported net income of $2.3 million, or $0.11 per diluted share, compared with a net loss from continuing operations of $4.1 million, or $0.21 per diluted share, in the corresponding period last year. Non-GAAP net income was $7.1 million, or $0.35 per diluted share, compared with non-GAAP net income from continuing operations of $6.0 million, or $0.30 per diluted share, in the corresponding period last year.


Second-quarter fiscal 2018 commentary
“We continued to deliver category leading growth in refrigerated side dishes in the second quarter, modestly exceeding our expectations,” said President and Chief Executive Officer Mike Townsley. “Second quarter margins, which are historically the lowest in our fiscal year as we invest in marketing initiatives to generate brand awareness ahead of our peak volume third quarter, were significantly impacted by higher sow costs (16 percent higher than prior year) that

1


began late in the first quarter and continued through September before declining. Additionally, higher trade spending during the quarter included strategic spend to maintain competitive positioning as well as slotting fees to support distribution gains. Lastly, our plant efficiencies were impacted by start-up activity for a new product with special packaging launched in advance of automated equipment planned for installation in early 2018.”

Second-quarter fiscal 2018 results
Net sales were $117.6 million, an increase of $21.5 million, or 22.3 percent, compared to $96.2 million in the corresponding period last year. The increase in net sales was partially driven by $9.5 million of sales from the Company's recently acquired Pineland business, as well as $6.0 million of sales to Bob Evans Restaurants (BER), which were eliminated in the prior year. Pounds sold for the second quarter increased 48.2 percent while average net selling price per pound declined 17.4 percent compared to the corresponding period last year. Excluding Pineland and sales to BER, pounds sold increased 11.4 percent while average net selling price per pound decreased 4.7 percent. The decline in average net selling price reflects an increased mix of food service sales as a result of both the acquisition of Pineland and the inclusion of sales to BER that were eliminated in the prior year period, as well as an increase in trade spending. From a net sales perspective, volume growth was driven by a 15.9 percent increase in retail side-dish pounds sold (excluding Pineland), a 4.5 percent increase in sausage pounds sold, and a 314.9 percent increase in food service pounds sold (16.8 percent excluding Pineland and BER), partially offset by a 10.6 percent decrease in the frozen and other categories, all compared to the comparable 13 week period in the prior year.

Gross profit increased 4.3 percent to $34.7 million in the second quarter of fiscal 2018 from $33.3 million in the second quarter of fiscal 2017. Gross profit margin decreased 510 basis points to 29.5 percent of net sales from 34.6 percent of net sales in the same period in the prior year. The decrease in gross profit margin was primarily driven by increased production costs associated with a new product launch, a higher mix of food service sales as a result of the acquisition of Pineland, an increase in average sow prices and higher trade spend.

Operating income increased to $2.6 million in the second quarter of 2018 from an operating loss from continuing operations of $4.8 million in the second quarter of fiscal 2017. Non-GAAP operating income was $9.9 million, compared to $11.4 million from continuing operations in the corresponding period last year, a decrease of $1.5 million or 13.2 percent.  The decrease was due primarily to lower gross profit margin coupled with higher operating expenses resulting from increased pounds sold and a $0.9 million increase in amortization expense associated with the preliminary value of definite-lived intangible assets acquired as part of the Pineland acquisition. 

Net interest expense was $1.0 million in the second quarter, a decrease of $0.3 million, compared to $1.3 million in the corresponding period last year. The decrease in interest costs was the result of lower average borrowings as compared to last year.

The Company’s GAAP tax rate for the second quarter of fiscal 2018 was a benefit of 38.2 percent compared to a benefit of 32.3 percent in the prior year period. The change in tax rates as compared to the corresponding period last year was primarily the result of discrete items recorded during the second quarter of fiscal 2018. The Non-GAAP tax rate was 20.4 percent compared to 33.2 percent in the prior year period.

Net income in the second quarter of fiscal 2018 was $2.3 million, or $0.11 per diluted share, compared to a net loss from continuing operations of $4.1 million or $0.21 per diluted share in the second quarter of fiscal 2017. Non-GAAP net income increased 18.4 percent to $7.1 million

2


or $0.35 per diluted share in the second quarter of fiscal 2018 from non-GAAP net income from continuing operations of $6.0 million or $0.30 per diluted share in the second quarter of fiscal 2017.

Adjusted EBITDA decreased 1.9 percent to $17.7 million in the second quarter of fiscal 2018 from $18.0 million in the second quarter of fiscal 2017. As a percentage of net sales, the adjusted EBITDA margin decreased 370 basis points to 15.0 percent of net sales.

Second-quarter 2018 balance sheet highlights
The Company’s cash balance and outstanding debt at October 27, 2017 were $1.4 million and $126.6 million, respectively, compared to $210.9 million and $2.7 million on April 28, 2017. The increase in borrowings and decrease in cash balance were primarily the result of the acquisition of Pineland Farms, which was completed on May 1, 2017, and the payment of a $7.50 per share special dividend on June 16, 2017.

Fiscal year 2018 outlook and conference call
On September 19, 2017, the Company and Post Holdings entered into a definitive merger agreement under which Post Holdings agreed to acquire Bob Evans. The transaction is expected to be completed in the first calendar quarter of 2018. In light of the pending transaction, the Company will not be updating its previously issued financial guidance for fiscal 2018 or holding a conference in connection with this earnings release. As announced on December 5, 2017, the required waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 , with respect to the previously announced acquisition of the Company by Post Holdings , expired on December 4, 2017.
  
Adjusted EBITDA and other non-GAAP financial measures
We define Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization including stock compensation. Management uses Adjusted EBITDA and the other non-GAAP measures included in this release as key metrics in the evaluation of underlying Company performance and in making financial, operating and planning decisions. The Company believes these measures are useful to investors because they increase transparency, assist investors in understanding the underlying performance of the Company and assist in the analysis of ongoing operating trends. We believe Adjusted EBITDA is frequently used by analysts, investors and other interested parties in their evaluation of the Company's performance as compared to our competitors, many of which present EBITDA measures when reporting their results.  We believe the non-GAAP measures used in this release 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 these 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. The presentation of Adjusted EBITDA and other non-GAAP measures included in this release should not be considered as an alternative to net income, determined in accordance with U.S. GAAP, as an indicator of the Company's operating performance, as an indicator of cash flows, or as a measure of liquidity. While Adjusted EBITDA and our other non-GAAP measures are frequently used as measures of operations, they are not necessarily comparable to other similarly titled captions of other companies due to the potential inconsistencies in the method of calculation.

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

3


uncertainties. Actual results may differ materially from those predicted by the forward-looking statements because of various factors and possible events. 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, 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. In addition, there are various risks and uncertainties associated with the pending transaction with Post Holdings, including but not limited to, the occurrence of any event, change or other circumstances that could delay the closing of the transaction; the ability and timing to obtain the approval of the Company’s stockholders and to satisfy other closing conditions to the merger agreement; the risk that stockholder litigation in connection with the proposed transaction may affect the timing or occurrence of the proposed transaction; and adverse effects on the Company’s common stock in the event of the failure to complete the proposed transaction. 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. is a leading producer and distributor of refrigerated potato, pasta and vegetable-based 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.bobevansgrocery.com .

Additional Information and Where to Find It
In connection with the proposed merger, a definitive proxy statement on Schedule 14A has been filed by the Company with the SEC and mailed to the Company’s stockholders. BOB EVANS STOCKHOLDERS ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY NOW AND WHEN ANY FUTURE FILINGS BECOME AVAILABLE BECAUSE THEY DO AND WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. Investors and security holders may obtain these documents free of charge at the SEC’s website, http://www.sec.gov. In addition, stockholders may obtain free copies of the documents at the Bob Evans website, www.bobevansgrocery.com, under the heading “Investors.”

Participants in the Solicitation
Bob Evans, Post and their respective directors and executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies from the stockholders of Bob Evans in connection with the proposed merger. Information regarding Post’s directors and executive officers is included in Post’s Annual Report on Form 10-K for the year ended September 30, 2017, filed with the SEC on November 17, 2017, and the proxy statement for Post’s 2018 Annual Meeting of Shareholders, filed with the SEC on November 20, 2017. Information regarding Bob Evans’ directors and executive officers is included in the Bob Evans Annual Report on Form 10-K for the fiscal year ended April 28, 2017, filed with the SEC on June 15, 2017 and the proxy statement for Bob Evans’ 2017 Annual

4


Meeting of Stockholders, filed with the SEC on July 14, 2017. Additional information regarding the interests of such participants in the solicitation of proxies in respect of the proposed merger are included in the definitive proxy statement.
 
Contact:
Scott Van Winkle
Managing Director, ICR
(617) 956-6736
scott.vanwinkle@icrinc.com



5



Bob Evans Farms, Inc.
Earnings Release Fact Sheet (unaudited)
Second quarter fiscal 2018 , three months ended October 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
 
October 27, 2017
 
October 28, 2016
 
October 27, 2017
 
October 28, 2016
 
October 27, 2017
 
October 28, 2016
Operating Income as Reported
 
 
 
 
 
 
 
 
 
 
 
Operating income
$
2,643

 
$
(4,768
)
 
 
 
 
 
 
 
 
Net interest expense
1,015

 
1,335

 
 
 
 
 
 
 
 
Income (Loss) from Continuing Operations Before Taxes
1,628

 
(6,103
)
 
 
 
 
 
 
 
 
Benefit for income taxes from continuing operations
(622
)
 
(1,969
)
 
 
 
 
 
 
 
 
Net Income (Loss) from Continuing Operations as Reported
2,250

 
(4,134
)
 
$
0.11

 
$
(0.21
)
 
$
0.11

 
$
(0.21
)
 
 
 
 
 
 
 
 
 
 
 
 
Income before taxes from discontinued operations

 
5,830

 
 
 
 
 
 
 
 
Provision for income taxes from discontinued operations

 
1,478

 
 
 
 
 
 
 
 
Income from Discontinued Operations as Reported

 
4,352

 
$

 
$
0.22

 
$

 
$
0.22

 
 
 
 
 
 
 
 
 
 
 
 
Net Income as Reported
2,250

 
218

 
$
0.11

 
$
0.01

 
$
0.11

 
$
0.01

 
 
 
 
 
 
 
 
 
 
 
 
Adjustments to Continuing Operations
 
 
 
 
 
 
 
 
 
 
 
Merger related costs
5,876

 

 
 
 
 
 
 
 
 
Separation costs
1,352

 

 
 
 
 
 
 
 
 
Integration costs
22

 

 
 
 
 
 
 
 
 
Impairment

 
16,000

 
 
 
 
 
 
 
 
Severance/Restructuring

 
168

 
 
 
 
 
 
 
 
Accretion income on note receivable

 
(1,133
)
 
 
 
 
 
 
 
 
Total Adjustments to Continuing Operations
7,250

 
15,035

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments to Discontinued Operations
 
 
 
 
 
 
 
 
 
 
 
Legal and professional fees

 
310

 
 
 
 
 
 
 
 
Total Adjustments to Discontinued Operations

 
310

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP Operating Income from Continuing Operations
9,893

 
11,400

 
 
 
 
 
 
 
 
Non-GAAP net interest expense
1,015

 
2,468

 
 
 
 
 
 
 
 
Non-GAAP income from continuing operations before taxes
8,878

 
8,932

 
 
 
 
 
 
 
 
Adjustments to tax expense from continuing operations
2,433

 
4,934

 
 
 
 
 
 
 
 
Non-GAAP provision for income taxes from continuing operations
1,811

 
2,965

 
 
 
 
 
 
 
 
Non-GAAP Net Income from Continuing Operations
7,067

 
5,967

 
$
0.35

 
$
0.30

 
$
0.35

 
$
0.30

 

 

 
 
 
 
 
 
 
 
Non-GAAP income from discontinued operations before taxes

 
6,140

 
 
 
 
 
 
 
 
Adjustments to tax expense from discontinued operations

 
(555
)
 
 
 
 
 
 
 
 
Non-GAAP provision for income taxes from discontinued operations

 
923

 
 
 
 
 
 
 
 
Non-GAAP Net Income from Discontinued Operations

 
5,217

 
$

 
$
0.26

 
$

 
$
0.26

 

 

 
 
 
 
 
 
 
 
Non-GAAP Net Income
$
7,067

 
$
11,184

 
$
0.35

 
$
0.56

 
$
0.35

 
$
0.56

 
 
 
 
 
 
 
 
 
 
 
 
Weighted Average Shares Outstanding
 
 
 
 
20,188

 
19,825

 
20,221

 
19,964


6




Second quarter fiscal 2018 , three months ended October 27, 2017 compared to the corresponding period a year ago:
(in thousands)
 
 
 
 
Three Months Ended
 
 
October 27, 2017
 
% of Sales
 
October 28, 2016
 
% of Sales
Operating Income from Continuing Operations, as Reported
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
$
117,626

 
 
 
$
96,158

 
 
Cost of goods sold
 
82,920

 
70.5
%
 
62,881

 
65.4
 %
Gross Margin
 
34,706

 
29.5
%
 
33,277

 
34.6
 %
 
 
 
 
 
 
 
 
 
Advertising and marketing costs
 
5,313

 
4.5
%
 
3,543

 
3.7
 %
Selling costs
 
4,257

 
3.6
%
 
4,099

 
4.3
 %
Distribution costs
 
5,373

 
4.6
%
 
4,674

 
4.9
 %
General and administrative costs
 
10,308

 
8.8
%
 
9,522

 
9.9
 %
Amortization of intangible assets
 
936

 
0.8
%
 
39

 
 %
Impairment, restructuring and other exit costs
 
5,876

 
5.0
%
 
16,168

 
16.8
 %
Operating Income (Loss)
 
2,643

 
2.2
%
 
(4,768
)
 
(5.0
)%
 
 
 
 
 
 
 
 
 
Non-GAAP Adjustments to Continuing Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
General and administrative
 
(1,374
)
 
 
 

 
 
Impairment, restructuring and other exit costs
 
(5,876
)
 
 
 
(16,168
)
 
 
Total Adjustments to Operating Income
 
7,250

 
 
 
16,168

 
 
 
 
 
 
 
 
 
 
 
Non-GAAP Operating Income from Continuing Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Sales
 
$
117,626

 
 
 
$
96,158

 
 
Cost of sales
 
82,920

 
70.5
%
 
62,881

 
65.4
 %
Gross Margin
 
34,706

 
29.5
%
 
33,277

 
34.6
 %
 
 
 
 
 
 
 
 
 
Advertising and marketing
 
5,313

 
4.5
%
 
3,543

 
3.7
 %
Selling costs
 
4,257

 
3.6
%
 
4,099

 
4.3
 %
Distribution costs
 
5,373

 
4.6
%
 
4,674

 
4.9
 %
General and administrative
 
8,934

 
7.6
%
 
9,522

 
9.9
 %
Amortization of intangible assets
 
936

 
0.8
%
 
39

 
 %
Impairment, restructuring and other exit costs
 

 
%
 

 
 %
Total non-GAAP operating income
 
$
9,893

 
8.4
%
 
$
11,400

 
11.8
 %
 
 
 
 
 
 
 
 
 
Depreciation and amortization from Continuing Operations
 
7,543

 
 
 
5,723

 
 
Stock compensation expense from Continuing Operations
 
249

 
 
 
904

 
 
Adjusted EBITDA
 
$
17,685

 
 
 
$
18,027

 
 




7




Bob Evans Farms, Inc.
Earnings Release Fact Sheet (unaudited)
Second quarter fiscal 2018 , six months ended October 27, 2017 , 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 27, 2017
 
October 28, 2016
 
October 27, 2017
 
October 28, 2016
 
October 27, 2017
 
October 28, 2016
Operating Income (Loss) as Reported
 
 
 
 
 
 
 
 
 
 
 
Operating income
$
13,721

 
$
3,498

 
 
 
 
 
 
 
 
Net interest expense
1,475

 
2,822

 
 
 
 
 
 
 
 
Income from Continuing Operations Before Taxes
12,246

 
676

 
 
 
 
 
 
 
 
Provision for income taxes from continuing operations
2,947

 
233

 
 
 
 
 
 
 
 
Net Income from Continuing Operations as Reported
9,299

 
443

 
$
0.46

 
$
0.02

 
$
0.46

 
$
0.02

 
 
 
 
 
 
 
 
 
 
 
 
Income before taxes from discontinued operations
 
 
10,857

 
 
 
 
 
 
 
 
Provision for income taxes from discontinued operations
 
 
1,919

 
 
 
 
 
 
 
 
Income from Discontinued Operations as Reported

 
8,938

 
$

 
$
0.45

 
$

 
$
0.45

 
 
 
 
 
 
 
 
 
 
 
 
Net Income as Reported
9,299

 
9,381

 
$
0.46

 
$
0.47

 
$
0.46

 
$
0.47

 
 
 
 
 
 
 
 
 
 
 
 
Adjustments to Continuing Operations
 
 
 
 
 
 
 
 
 
 
 
Merger related costs
5,876

 

 
 
 
 
 
 
 
 
Separation costs
1,786

 

 
 
 
 
 
 
 
 
Integration costs
579

 

 
 
 
 
 
 
 
 
Impairment

 
16,000

 
 
 
 
 
 
 
 
Severance / Restructuring
(291
)
 
168

 
 
 
 
 
 
 
 
Accretion income on note receivable

 
(1,133
)
 
 
 
 
 
 
 
 
Total Adjustments to Continuing Operations
7,950

 
15,035

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments to Discontinued Operations
 
 
 
 
 
 
 
 
 
 
 
Legal and professional fees

 
310

 
 
 
 
 
 
 
 
Store closure costs

 
807

 
 
 
 
 
 
 
 
Litigation settlement costs

 
(278
)
 
 
 
 
 
 
 
 
Total Adjustments to Discontinued Operations

 
839

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP Operating Income from Continuing Operations
21,671

 
19,666

 
 
 
 
 
 
 
 
Non-GAAP net interest expense
1,475

 
3,955

 
 
 
 
 
 
 
 
Non-GAAP income before taxes from continuing operations
20,196

 
15,711

 
 
 
 
 
 
 
 
Adjustments to tax expense from continuing operations
2,748

 
4,934

 
 
 
 
 
 
 
 
Non-GAAP provision for income taxes from continuing operations
5,695

 
5,167

 
 
 
 
 
 
 
 
Non-GAAP net income from continuing operations
14,501

 
10,544

 
$
0.72

 
$
0.53

 
$
0.72

 
$
0.53

 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP income before taxes from discontinued operations

 
11,696

 
 
 
 
 
 
 
 
Adjustments to tax expense from discontinued operations

 
(414
)
 
 
 
 
 
 
 
 
Non-GAAP (benefit) provision for income taxes from discontinuing operations

 
1,505

 
 
 
 
 
 
 
 
Non-GAAP net income from discontinued operations

 
10,191

 
$

 
$
0.52

 
$

 
$
0.51

 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP net income
$
14,501

 
$
20,735

 
$
0.72

 
$
1.05

 
$
0.72

 
$
1.04

 
 
 
 
 
 
 
 
 
 
 
 
Weighted Average Shares Outstanding
 
 
 
 
20,166

 
19,807

 
20,201

 
19,982



8



Second quarter fiscal 2018 , six months ended October 27, 2017 , compared to the corresponding period a year ago:
(in thousands)
 
 
 
 
 
 
 
 
Six Months Ended
 
October 27, 2017
 
% of Sales
 
October 28, 2016
 
% of Sales
Operating income from Continuing Operations, as reported
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Sales
$
226,891

 
 
 
$
182,099

 
 
Cost of goods sold
158,746

 
70.0
%
 
120,301

 
66.1
%
Gross Margin
68,145

 
30.0
%
 
61,798

 
33.9
%
 
 
 
 
 
 
 
 
Advertising and marketing costs
8,377

 
3.7
%
 
6,782

 
3.7
%
Selling costs
8,690

 
3.8
%
 
7,813

 
4.3
%
Distribution costs
10,736

 
4.7
%
 
8,623

 
4.8
%
General and administrative costs
18,908

 
8.4
%
 
18,836

 
10.3
%
Amortization of intangible assets
1,837

 
0.8
%
 
78

 
%
Impairment, restructuring and other exit costs
5,876

 
2.6
%
 
16,168

 
8.9
%
Operating Income
13,721

 
6.0
%
 
3,498

 
1.9
%
 
 
 
 
 
 
 
 
Non-GAAP Adjustments to Continuing Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
General and administrative
(2,074
)
 
 
 

 
 
Impairment, restructuring and other exit costs
(5,876
)
 
 
 
(16,168
)
 
 
Total Adjustments to Operating Income
7,950

 
 
 
16,168

 
 
 
 
 
 
 
 
 
 
Non-GAAP Operating Income from Continuing Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Sales
$
226,891

 
 
 
$
182,099

 
 
Cost of goods sold
158,746

 
70.0
%
 
120,301

 
66.1
%
Gross Margin
68,145

 
30.0
%
 
61,798

 
33.9
%
 

 

 

 

Advertising and marketing costs
8,377

 
3.7
%
 
6,782

 
3.7
%
Selling costs
8,690

 
3.8
%
 
7,813

 
4.3
%
Distribution costs
10,736

 
4.7
%
 
8,623

 
4.8
%
General and administrative costs
16,834

 
7.4
%
 
18,836

 
10.3
%
Amortization of intangible assets
1,837

 
0.8
%
 
78

 
%
Impairment, restructuring and other exit costs

 
%
 

 
%
Total non-GAAP operating income
$
21,671

 
9.6
%
 
$
19,666

 
10.8
%
 
 
 
 
 
 
 
 
Depreciation and amortization from Continuing Operations
14,989

 
 
 
10,859

 
 
Stock compensation expense from Continuing Operations
546

 
 
 
1,628

 
 
Adjusted EBITDA
$
37,206

 
 
 
$
32,153

 
 



9



Consolidated Statements of Net Income
 
Three Months Ended
 
Six Months Ended
 
October 27, 2017
 
October 28, 2016
 
October 27, 2017
 
October 28, 2016
Net Sales
$
117,626

 
$
96,158

 
$
226,891

 
$
182,099

Cost of goods sold
82,920

 
62,881

 
158,746

 
120,301

Gross Margin
34,706

 
33,277

 
68,145

 
61,798

Operating expenses:
 
 
 
 
 
 
 
Advertising and marketing costs
5,313

 
3,543

 
8,377

 
6,782

Selling costs
4,257

 
4,099

 
31,132

 
31,198

Distribution costs
5,373

 
4,674

 
44,372

 
37,640

General and administrative costs
10,308

 
9,522

 
8,377

 
6,782

Amortization of intangible assets
936

 
39

 
8,690

 
7,813

Impairment, restructuring and other exit costs
5,876

 
16,168

 
10,736

 
8,623

Operating Income (Loss)
2,643

 
(4,768
)
 
18,908

 
18,836

Net interest expense
1,015

 
1,335

 
1,837

 
78

Income (Loss) from Continuing Operations Before Income Taxes
1,628

 
(6,103
)
 
5,876

 
16,168

(Benefit) Provision for income taxes
(622
)
 
(1,969
)
 
13,721

 
3,498

Income (Loss) from Continuing Operations
2,250

 
(4,134
)
 
1,475

 
2,822

 
 
 
 
 
 
 
 
Income from Discontinued Operations, net of Income Taxes

 
4,352

 
12,246

 
676

Net Income
$
2,250

 
$
218

 
$
9,299

 
$
9,381

 
 
 
 
 
 
 
 
Earnings Per Share — Income (Loss) from Continuing Operations
 
 
 
 
 
 
 
Basic
$
0.11

 
$
(0.21
)
 
$
0.46

 
$
0.02

Diluted
$
0.11

 
$
(0.21
)
 
$
0.46

 
$
0.02

 
 
 
 
 
 
 
 
Earnings Per Share — Income from Discontinued Operations
 
 
 
 
 
 
 
Basic
$

 
$
0.22

 
$

 
$
0.45

Diluted
$

 
$
0.22

 
$

 
$
0.45

 
 
 
 
 
 
 
 
Earnings Per Share — Net Income
 
 
 
 
 
 
 
Basic
$
0.11

 
$
0.01

 
$
0.46

 
$
0.47

Diluted
$
0.11

 
$
0.01

 
$
0.46

 
$
0.47

 
 
 
 
 
 
 
 
Cash Dividends Paid Per Share
$
0.34

 
$
0.34

 
$
8.18

 
$
0.68

 
 
 
 
 
 
 
 
Weighted Average Shares Outstanding
 
 
 
 
 
 
 
Basic
20,188

 
19,825

 
20,166

 
19,807

Dilutive shares
33

 
139

 
35

 
175

Diluted
20,221

 
19,964

 
20,201

 
19,982



10



Consolidated Balance Sheets
 
Unaudited
October 27, 2017
 
April 28, 2017
Assets
Current Assets
 
 
 
Cash and equivalents
$
1,438

 
$
210,886

Accounts receivable, net
41,782

 
28,071

Inventories
29,709

 
17,210

Federal and state income taxes receivable
15,155

 
2,895

Prepaid expenses and other current assets
6,268

 
6,833

Current assets held for sale
3,334

 
3,334

Total Current Assets
97,686

 
269,229

Property, plant and equipment
296,745

 
244,554

Less accumulated depreciation
133,386

 
113,814

Net Property, Plant and Equipment
163,359

 
130,740

Other Assets

 

Deposits and other
1,896

 
2,118

Rabbi trust assets
23,346

 
22,353

Goodwill
99,829

 
19,634

Other intangible assets, net
35,167

 
39

Deferred income tax assets
5,291

 
5,131

Total Other Assets
165,529

 
49,275

Total Assets
$
426,574

 
$
449,244

Liabilities and Stockholders’ Equity
Current Liabilities
 
 
 
Current debt payable
$
1,588

 
$
428

Accounts payable
24,004

 
13,424

Accrued property, plant and equipment purchases
1,353

 
1,283

Accrued non-income taxes
1,126

 
3,353

Accrued wages and related liabilities
5,933

 
16,404

Self-insurance reserves
4,829

 
7,878

Current taxes payable
1,483

 
27,954

Current reserve for uncertain tax provision
1,481

 
1,481

Other accrued expenses
18,160

 
17,905

Total Current Liabilities
59,957

 
90,110

Non-Current Liabilities
 
 
 
Deferred compensation
17,125

 
17,277

Reserve for uncertain tax positions
2,595

 
1,795

Deferred income tax liabilities
18,655

 
50

Other non-current liabilities
29,552

 
6,097

Credit facility borrowings and other non-current debt
125,023

 
2,267

Total Non-Current Liabilities
192,950

 
27,486

Stockholders’ Equity
 
 
 
Common stock, $0.01 par value; authorized 100,000 shares; issued 42,638 shares at October 27, 2017, and April 28, 2017
426

 
426

Capital in excess of par value
258,025

 
260,619

Retained earnings
775,580

 
931,315

Treasury stock, 22,663 shares at October 27, 2017, and 22,842 shares at April 28, 2017, at cost
(860,364
)
 
(860,712
)
Total Stockholders’ Equity
173,667

 
331,648

Total Liabilities and Stockholders' Equity
$
426,574

 
$
449,244



11



Consolidated Statements of Cash Flows
 
Six Months Ended
 
October 27, 2017
 
October 28, 2016
Operating activities:
 
 
 
Net income
$
9,299

 
$
9,381

 
 
 
 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
14,989

 
35,218

Impairments

 
16,523

Gain on disposal of fixed assets
(35
)
 
(1,664
)
Gain on rabbi trust assets
(994
)
 
(967
)
Loss on deferred compensation
1,479

 
1,115

Share-based compensation
546

 
3,263

Accretion on long-term note receivable

 
(1,133
)
Deferred income taxes
(1
)
 
(5,903
)
Amortization of deferred financing costs
154

 
720

Cash provided by (used for) assets and liabilities:
 
 
 
Accounts receivable
(7,703
)
 
(10,930
)
Inventories
(9,283
)
 
(8,338
)
Prepaid expenses and other current assets
1,334

 
491

Accounts payable
8,356

 
4,110

Federal and state income taxes
(38,638
)
 
(11,185
)
Accrued wages and related liabilities
(10,900
)
 
(6,941
)
Self-insurance
(3,049
)
 
(1,740
)
Accrued non-income taxes
(2,227
)
 
(1,450
)
Deferred revenue

 
(2,096
)
Other assets and liabilities
(2,482
)
 
(7,060
)
Net cash (used in) provided by operating activities
(39,155
)
 
11,414

Investing activities:
 
 
 
Acquisition of Pineland Farms Potato Company
(115,811
)
 

Purchase of property, plant and equipment
(9,817
)
 
(37,086
)
Proceeds from sale of property, plant and equipment
11

 
10,688

Deposits and other
82

 
130

Net cash used in investing activities
(125,535
)
 
(26,268
)
Financing activities:
 
 
 
Cash dividends paid
(163,013
)
 
(13,452
)
Gross proceeds from credit facility borrowings and other long-term debt
147,500

 
189,179

Gross repayments of credit facility borrowings and other long-term debt
(23,585
)
 
(166,490
)
Cash paid for taxes on share-based compensation
(5,660
)
 
(667
)
Excess tax benefits from share-based compensation

 
(1,729
)
Net cash (used in) provided by financing activities
(44,758
)
 
6,841

Net cash used in operations
(209,448
)
 
(8,013
)
Cash and equivalents at the beginning of the period
210,886

 
12,896

Cash and equivalents at the end of the period
$
1,438

 
$
4,883

BEF Foods total pounds sold, by category
 
 
 
 
 
 
Fiscal 2018
 
 
 
 
 
 
 
 
 
 
Category
 
Q1
 
Q2
 
Q3
 
Q4
 
YTD
Sides
 
43.5%
 
46.2%
 
 
 
 
 
44.9%
Sausage
 
17.1%
 
17.0%
 
 
 
 
 
17.0%
Food Service
 
35.3%
 
32.9%
 

 
 
 
34.0%
Frozen
 
2.6%
 
2.3%
 
 
 
 
 
2.4%
Other
 
1.5%
 
1.6%
 
 
 
 
 
1.7%
 
 
 
 
 
 
 
 
 
 
 
Fiscal 2017
 
 
 
 
 
 
 
 
 
 
Category
 
Q1
 
Q2
 
Q3
 
Q4
 
FY 2017
Sides
 
51.4%
 
52.5%
 
52.5%
 
54.0%
 
52.6%
Sausage
 
21.2%
 
21.9%
 
24.9%
 
22.3%
 
22.7%
Food Service - External
 
11.6%
 
10.7%
 
10.1%
 
11.1%
 
10.8%
Food Service - Sales to discontinued operations
 
8.3%
 
9.0%
 
7.7%
 
7.7%
 
8.1%
Frozen
 
3.9%
 
3.4%
 
2.7%
 
3.0%
 
3.2%
Other
 
3.6%
 
2.5%
 
2.1%
 
1.9%
 
2.6%


12