Bob Evans Reports Fiscal 2013 Third-Quarter Results

COLUMBUS, Ohio, Feb. 19, 2013 /PRNewswire/ -- 

Bob Evans Farms, Inc. reports net sales increase of 1.4%.  Bob Evans Restaurants achieves positive same-store sales of 1.6%, its third consecutive quarter with positive same-store sales, despite approximately 50 basis points of weather-related impact.  BEF Foods' net sales increase 7.5%; volume up 13.1%.  Partially offsetting these increases, Mimi's Cafe's same-store sales decline 4.0%

Company announces 3Q 2013 earnings per diluted share of $0.20; non-GAAP EPS, adjusted for restructuring and other items, is $0.56 for the quarter 

Farm Fresh Refresh restaurant remodeling program continues to drive performance with positive same-store sales of 3.1% at remodels completed within one year.  Remodels completed more than a year ago report positive same-store sales of 2.7%, reflecting long-term sales lift impact of the program

Kettle Creations' integration progressing ahead of schedule, accretive $0.02 per diluted share to 3Q 2013 earnings.  Vertical integration at 87% as BEF Foods continues to expand internal production capabilities to drive its refrigerated side dish business

Company achieved interest expense savings through retirement of its private placement notes

Company expects organizational efficiencies and a $53 to $63 million cash tax benefit to result from the recent conversion of its restaurant operating entities to limited liability companies

Company reports closing the sale of Mimi's Cafe restaurant chain on February 15, 2013

Company provides fourth-quarter fiscal year 2013 diluted EPS guidance of $0.60 to $0.65, which includes $0.03 per share of costs associated with providing Mimi's Cafe with transition support services

Bob Evans Farms, Inc (NASDAQ: BOBE) today announced its results for the fiscal 2013 third quarter ended Friday, January 25, 2013.

Third-quarter fiscal 2013 commentary

Commenting on third-quarter fiscal 2013 results, Chairman and Chief Executive Officer Steve Davis said, "I am very proud of our highly disciplined teams this quarter.  In the midst of several complex transformational projects, we did not lose sight of driving positive sales results in Bob Evans Restaurants and BEF Foods.  While successfully accelerating the Farm Fresh Refresh remodeling program at Bob Evans Restaurants; insourcing a product line formerly produced by a third party for BEF Foods; and completing the sale of Mimi's Cafe, we simultaneously drove sales growth in both of our Bob Evans-branded business segments. 

"While there have been significant investments and expenses associated with transforming our Company for growth this quarter, all have been undertaken with an eye on positioning Bob Evans Restaurants and BEF Foods for sustainable growth in the years ahead, and driving returns on invested capital.  Not only did we successfully execute transformational projects in each of our business segments, from a corporate perspective we improved our operational flexibility, and reduced the cost of our debt structure substantially, by pre-paying our private placement notes with cash on hand and funds from our lower-cost credit facility.  We also restructured our restaurant operating entities by converting them to limited liability companies, which streamlined our organizational structure and generated an estimated tax benefit of $53 to $63 million, the majority of which we expect to realize during the next two years.  We believe we are now well-positioned to deliver on our long-term annual non-GAAP EPS growth guidance of 8 to 12 percent in the years ahead through a combination of positive top-line results and ongoing cost initiatives to leverage sales growth in both businesses."

Davis continued, "The Farm Fresh Refresh remodeling program continues to drive positive sales and return on invested capital trends at Bob Evans Restaurants.  This was the third consecutive quarter of same-store sales gains at Bob Evans Restaurants.  Importantly, restaurants that have been remodeled for more than a year are building on their already impressive first-year sales gains as this group generated positive same-store sales of 2.7 percent during the quarter.  The Farm Fresh Refresh remodeling program was designed to drive dine-in sales, as well as develop new sales layers including bakery, carryout, and catering.  We believe the continued strong sales performance of remodeled restaurants reflects progress in meeting those objectives, and it gives us confidence in our decision to accelerate the completion of the remodeling program in fiscal 2014, one year earlier than originally anticipated.  Accelerating the Farm Fresh Refresh remodeling program not only provides an opportunity to realize the financial benefits of the program early, it enables us to transition sooner to a more meaningful level of sales layer development and new restaurant openings beginning in fiscal 2015. 

"At BEF Foods, we grew for a third straight quarter with net sales and volume gains of 7.5 percent and 13.1 percent, respectively.  Our second-quarter fiscal 2013 acquisition of the Kettle Creations brand and manufacturing facility is already accretive to earnings, and we believe will become more so after its current expansion is complete.  During the third quarter, we grew refrigerated side dish sales by 9.2 percent compared to the same period last year.  Expansion and innovation at Kettle Creations' manufacturing facility was a key element in driving that growth.  BEF Foods is now nearly 90 percent vertically integrated, and we believe that provides us with tremendous advantage as we improve our operating cost structure.  It also enhances our product innovation capabilities as we continue to grow the refrigerated side dish business, now our largest product category."

Davis added, "We announced an agreement to sell our Mimi's Cafe business segment on January 28, 2013, and subsequently closed the transaction on February 15, 2013.  The transaction represents a turning point for our Company as we are now better focused on driving growth of our two Bob Evans-branded businesses.  We have tremendous respect for the team at Mimi's Cafe, and wish them success as they continue their brand transformation under the ownership of LeDuff America, Inc.  We will provide transitional services to Mimi's Cafe for approximately a year." 

Third-quarter fiscal 2013 consolidated results and GAAP to Non-GAAP reconciliation

The Company reported net income of $5.5 million, or $0.20 per diluted share.  The third-quarter results include the negative net pretax impact of $32.3 million of costs, or $10.3 million after-tax, from the following GAAP to non-GAAP reconciling items related primarily to the Company's restructuring activities and the sale of Mimi's Cafe:

Mimi's Cafe sale-related net costs of $19.9 million include the following items:

  • $22.7 million in noncash charges for intangible impairments in Mimi's Cafe that increased the intangible impairment line;
  • $1.1 million in charges for severance and restructuring payments in Mimi's Cafe that increased the SG&A line; offset partially by
  • $3.9 million in noncash depreciation and amortization in Mimi's Cafe that decreased the depreciation and amortization line.

Costs associated with the sale will be disclosed in the fourth quarter GAAP to non-GAAP reconciliation schedule.

The conversion of our restaurant operating companies to a limited liability company structure, and private placement retirement costs of $6.2 million include the following items:

  • $0.5 million and $156.4 million for extinguishment of intercompany debt that decreased the SG&A line for Bob Evans Restaurants and Mimi's Cafe, respectively, which were offset in consolidation by $156.9 million for extinguishment of intercompany debt that increased the SG&A line for BEF Foods; and
  • $6.2 million of costs associated with the early payment of the Company's private placement notes that increased the net interest expense line.

Plant and facility closures and other restructuring net costs of $1.3 million include the following items:

  • $1.2 million in BEF Foods charges for severance related to the previously announced Bidwell, Ohio, and Springfield, Ohio, plant closures as well as retention payments related to the Kettle Creations acquisition, both of which increased the SG&A line;
  • $0.3 million in charges for severance and retention payments in Bob Evans Restaurants that increased the SG&A line; offset partially by
  • $0.2 million in income for a gain on the sale of assets in Bob Evans Restaurants that decreased the SG&A line.

Other charges including asset impairments and merger and acquisition related costs of $5.0 million include the following items:

  • $2.4 million in noncash charges for impairments in Bob Evans Restaurants that increased the SG&A line;
  • $2.1 million in noncash charges for impairments in Mimi's Cafe that increased the SG&A line;
  • $0.3 million in noncash charges in Mimi's Cafe that increased the other operating expenses line; and
  • $0.2 million in charges for merger and acquisition related costs in BEF Foods that increased the SG&A line.

Earnings per diluted share for the third quarter of fiscal 2013 were $0.20.  Excluding the net negative impact of the aforementioned charges, non-GAAP diluted earnings per share would have been $0.56.

Earnings per diluted share for the third quarter of fiscal 2012 were $0.69. There were no non-GAAP adjustments during the third quarter of fiscal 2012.

A number of large items, not permanent in nature, impacted quarterly performance compared to last year and are included in both the $0.20 per diluted share and $0.56 non-GAAP diluted earnings per share.  Those items include:

  • a $0.07 per share decline in profitability as a result of continued top line weakness at Mimi's Cafe; 
  • an $0.08 per share decline in profitability of the BEF Foods segment as a result of a shift in marketing spending to the third quarter from the first and second quarters;  
  • a $0.03 per share decline in profitability of the BEF Foods segment as a result of higher costs arising from a production disruption attributable to, and a unilateral price increase taken by, one of the Company's suppliers; and
  • a $0.01 per share decline in Bob Evans Restaurants' profitability as a result of unfavorable snow events in December, partially offset by favorable weather in January compared to the prior year.

Additionally, last year's results include a $0.05 per diluted share benefit resulting from a tax settlement.  The benefit was not repeated in this year's third quarter.

Partially offsetting the above listed items are: profitability associated with Kettle Creations performance, lower interest expense and lower share count, each of which was favorable $0.02 per diluted share, for a total contribution of approximately $0.06 per diluted share.

During the third quarter of fiscal 2013, the effective tax rate recorded by the Company was 160.8 percent primarily as a result of restructuring activity, compared to 28.6 percent in the third quarter of fiscal 2012.  The effective tax rate in fiscal 2012 reflects the impact of a state income tax settlement.  The dollar value of the settlement was $1.4 million, or $0.05 per diluted share.  Excluding the restructuring activity, on a year-to-date basis, the company would have experienced a tax rate of approximately 32 percent.  The Company utilized the 32 percent rate in calculating the non-GAAP third quarter fiscal 2013 results.

As a result of the items noted above, the Company uses non-GAAP financial measures excluding those items.  These financial measures are used by management to monitor and evaluate the ongoing performance of the Company.  The Company believes that the additional measures are useful to investors for financial analysis.  However, non-GAAP measures are not in accordance with, nor are they a substitute for, GAAP measures.  Please see the table in this release for a reconciliation of non-GAAP measures to GAAP results.  Results in the following discussion are presented on a non-GAAP basis excluding the items noted above.

Third-quarter fiscal 2013 consolidated income statement summary

Below is a summary of the Company's consolidated third-quarter fiscal 2013 income statement.

  • Net sales – Consolidated net sales were $434.4 million in the third quarter of fiscal 2013, a 1.4 percent increase, compared to $428.3 million in the third quarter of fiscal 2012. This growth was the result of a net sales increase in the BEF Foods segment as well as new restaurant and same-store sales increases at Bob Evans Restaurants, partially offset by same-store sales declines at Mimi's Cafe.  
  • Operating income – Consolidated non-GAAP operating income was $24.5 million, or 5.6 percent of net sales, in the third quarter of fiscal 2013, compared to $30.3 million, or 7.1 percent of net sales, in the third quarter of fiscal 2012.  The decline was due to same-store sales declines at Mimi's Cafe, the negative sales and cost impact of inclement weather at Bob Evans Restaurants, the timing shift of marketing expenditures at BEF Foods from the first and second quarters to the third quarter, cost increases at Bob Evans Restaurants for long-term incentives and depreciation, and higher costs arising from a production disruption attributable to, and a unilateral price increase taken by, one of the Company's suppliers.  These factors were not completely offset by the consolidated net sales increase.
  • Net interest expense – The Company's non-GAAP net interest expense was $1.3 million in the third quarter of fiscal 2013, compared to $1.9 million in fiscal 2012.  The decrease was the result of the December prepayment of our private placement notes, partially offset by interest expense on incremental borrowings from our low-cost variable-rate revolving credit facility.
  • Diluted weighted-average shares outstanding – The Company's diluted weighted-average shares outstanding were 28.1 million in the third quarter of fiscal 2013, compared to 29.4 million in the third quarter of fiscal 2012. The Company repurchased 224,821 shares for $8.9 million in the third quarter of fiscal 2013. 

Third-quarter fiscal 2013 Bob Evans Restaurants segment summary

Bob Evans Restaurants' fiscal 2013 third-quarter non-GAAP operating income was $19.5 million, or 8.0 percent of net sales, compared with $19.9 million, or 8.2 percent of net sales, last year.  The most significant driver of the decrease in profitability was a $2.4 million increase in SG&A due primarily to higher costs associated with the Company's 401k Plan match and long-term incentives.  Additional SG&A costs included incremental restaurant supplies and pre-opening expenses for the Farm Fresh Refresh remodel program.  Other drivers of the decrease in profitability included $1.3 million in incremental depreciation related primarily to the Farm Fresh Refresh remodel program, and the estimated $0.5 million net negative effect resulting from adverse December and favorable January weather events. These items were partially offset by positive same-store sales of 1.6 percent.

During the quarter, an additional 28 restaurants from the Farm Fresh Refresh markets of Detroit and Toledo moved into the category of restaurants remodeled for more than a year.  Those restaurants join the 27 restaurants from the Dayton market that completed a remodel more than one year ago.  The 2.7 percent same-store sales growth of these restaurants is demonstrating the sustained power of the program in markets remodeled more than one year.  Additionally, 40 restaurants were remodeled during the quarter, compared with 15 restaurants during last year's third quarter.  As a result, the Company experienced 258 closed restaurant days in the quarter compared with 118 closed restaurant days in last year's third quarter, which equates to an approximately $0.5 million negative impact of incremental lost sales.  Each restaurant to be remodeled is closed from five to seven days.  Overall, the remodeled markets, including the effect of closed days, continued to outpace the non-remodeled restaurants.  The Company plans to complete the Farm Fresh Refresh remodeling program for the entire chain by the end of fiscal 2014.

Net sales – Bob Evans Restaurants' net sales were $245.5 million in the third quarter of fiscal 2013, compared with sales of $242.4 million in the corresponding period last year.  The increase was driven by the 1.6 percent increase in same-store sales, which exceeded the Midscale Family Style segment, according to The NPD Group's SalesTrack Weekly.


Category

SSS Restaurants

Nov.

Dec.

Jan.

3Q  FY
'13

FY '13
YTD

Bob Evans

   Family

552

2.1%

-0.5%

3.1%

1.6%

1.2%

During the third quarter of fiscal 2013, Bob Evans Restaurants:

  • Refreshed 40 restaurants.
  • Did not open or rebuild any restaurants.

Cost of sales – Bob Evans Restaurants' cost of sales was 24.3 percent of net sales in the third quarter of fiscal 2013, compared to 24.1 percent in the third quarter of fiscal 2012. The increase in cost of sales as a percent of net sales was due to commodity increases and menu mix, which were partially offset by menu pricing of approximately 2.8 percent, and ongoing efficiency initiatives, including the actual-versus-theoretical food cost program.

Operating wages – Bob Evans Restaurants' cost of labor was 37.5 percent of net sales in the third quarter of fiscal 2013, compared to 38.1 percent of net sales in fiscal 2012. The decline in operating wages as a percent of net sales in the third quarter of fiscal 2013 was due primarily to sales leverage from improvement in same-store sales of 1.6 percent and labor efficiency initiatives including more effective scheduling.

Other operating expenses – Bob Evans Restaurants' other operating expenses were 17.7 percent of net sales in the third quarter of fiscal 2013, compared to 18.4 percent of net sales in the third quarter of fiscal 2012. The decrease resulted primarily from a decline in advertising expenditures. 

SG&A – Bob Evans Restaurants' non-GAAP SG&A expenses were $17.4 million, or 7.1 percent of net sales, in the third quarter of fiscal 2013, compared with $15.0 million, or 6.2 percent of net sales, in the third quarter of fiscal 2012. The $2.4 million increase was due primarily to higher costs associated with the Company's 401k Plan match and long-term incentives.

Third-quarter fiscal 2013 Mimi's Cafe segment summary

Mimi's Cafe's third-quarter fiscal 2013 non-GAAP operating income was $0.3 million, or 0.3 percent of net sales, compared to operating income of $3.2 million, or 3.4 percent of net sales in the third quarter of fiscal 2012.  The primary reason for the decline in the operating income was the same-store sales decline in the third quarter of fiscal 2013.

Net sales – Mimi's Cafe's net sales were $91.1 million in the third quarter of fiscal 2013, down $3.8 million, compared to $94.9 million in the corresponding period last year. The decrease resulted from declines in same-store sales of 4.0 percent, which included 1.3 percent in average menu price increases.  At Mimi's Cafe, the same-store sales decline trailed the Knapp Track™ casual dining index of -0.6 percent for the same period. 


Category

SSS Restaurants

Nov.

Dec.

Jan.

3Q  FY
'13

FY '13
YTD

Mimi's Cafe

   Casual

145

-3.5%

-6.3%

-2.1%

-4.0%

-4.3%

During the third quarter of fiscal 2013, Mimi's Cafe did not remodel, open or rebuild any restaurants.

Cost of sales – Mimi's Cafe's cost of sales was 25.7 percent of net sales in the third quarter of fiscal 2013, compared to 27.2 percent in the third quarter of fiscal 2012. The decrease in cost of sales as a percent of net sales was due to food cost initiatives, ongoing efficiency initiatives including the actual-versus-theoretical food cost program, and a new menu designed to drive product mix favorability, which were partially offset by commodity increases.

Operating wages – Mimi's Cafe's cost of labor was 37.7 percent of net sales in the third quarter of fiscal 2013, compared to 35.9 percent in the third quarter of fiscal 2012. The increase in operating wages as a percent of net sales was due to deleverage from declines in same-store sales. 

Other operating expenses – Mimi's Cafe's non-GAAP other operating expenses were $20.5 million, or 22.5 percent of net sales, in the third quarter of fiscal 2013, compared to $20.1 million, or 21.2 percent of net sales, in the third quarter of fiscal 2012. The increase in other operating expenses as a percent of net sales was primarily due to deleverage from declines in same-store sales.

SG&A – Mimi's Cafe's non-GAAP SG&A expenses were $6.7 million, or 7.3 percent of net sales, in the third quarter of fiscal 2013, compared to $5.8 million, or 6.2 percent of net sales, in the third quarter of fiscal 2012. The increase in SG&A was the result of increases in corporate allocations driven by higher costs associated with the Company's 401k Plan match, long-term incentive compensation, and incremental legal accruals. 

Third-quarter fiscal 2013 BEF Foods segment summary

BEF Foods' third-quarter fiscal 2013 non-GAAP operating income was $4.7 million, or 4.8 percent of net sales, in the third quarter of fiscal 2013, compared to $7.1 million, or 7.9 percent of net sales, in the corresponding period last year.  The primary driver of the decrease in operating income was an increase in SG&A of $3.5 million as a result of the timing shift of marketing expenditures from the first and second quarters to the third quarter, partially offset by an increase in total pounds sold of 13.1 percent, and a 3.0 percent decline in sow costs.

Additionally, total cost of sales and operating wages, although favorable to last year, were not as favorable as expected.  During the quarter, a supplier notified the Company that it would cease providing an integral component of the Company's side-dish business.  Given the timing of the notification coupled with the Company's desire to avoid supply interruption to its customers during a major production period, the Company incurred additional expenses reconfiguring its existing production lines to insource production of this product.  The capital cost of this new equipment was approximately $1.7 million.  The disruption to the Company's production lines coupled with initial inefficiencies in manufacturing adversely impacted profitability during the quarter.  The Company continues to refine Kettle Creations' operations to improve efficiencies. 

Furthermore, the same supplier imposed a unilateral price increase on other products, which it continues to supply to the Company.  Currently, the Company estimates the cumulative effect of the two actions related to this supplier have impacted its results by approximately $0.03 per share for the quarter.  Continued and contemplated impacts from these items for the fourth quarter have been reflected in the Company's guidance, and efforts continue to minimize additional, if any, adverse impacts. 

The acquisition of Kettle Creations during the second quarter of this year impacted cost of sales, operating wages, and other operating expenses.  Prior to the acquisition of Kettle Creations, all costs were included in cost of sales.  Subsequent to the acquisition, as an owned facility, rather than as a supplier, labor costs are included in operating wages; and utilities, freight, and hauling costs are included in other operating expenses. 

Net sales – The BEF Foods segment's third-quarter fiscal 2013 net sales were $97.8 million, an increase of 7.5 percent, compared to $91.0 million in the third quarter of fiscal 2012. Total pounds sold increased 13.1 percent.  Promotional discounts and other selling allowances are included as a reduction to gross sales.  The Kettle Creations acquisition accounted for $1.7 million of the net sales increase and 3.5 percentage points of the volume increase. 

Cost of sales – The BEF Foods segment's third-quarter fiscal 2013 cost of sales was 52.9 percent of net sales, compared to 58.7 percent of net sales in the third quarter of fiscal 2012. The decrease was due primarily to the acquisition of Kettle Creations and the decline in sow costs.  A unilateral price increase taken by one of the Company's suppliers impacted this line unfavorably by approximately $0.02 per share.

Operating wages – The BEF Foods segment's third-quarter fiscal 2013 cost of labor was 11.1 percent of net sales, compared to 7.8 percent of net sales in the third quarter of fiscal 2012.  As noted above, the increase was primarily due to the Company's acquisition of Kettle Creations.  

Other operating expenses – The BEF Foods segment's other operating expenses were 7.9 percent of net sales in the third quarter of fiscal 2013, compared to 5.7 percent of net sales in the third quarter of fiscal 2012. As noted above, the increase was primarily due to the Company's acquisition of Kettle Creations, partially offset by manufacturing productivity initiatives.  A production disruption attributable to one of the Company's suppliers impacted this line unfavorably by approximately $0.01 per share.

SG&A – The BEF Foods segment's non-GAAP SG&A expenses were 19.7 percent of net sales in the third quarter of fiscal 2013, compared to 17.3 percent of net sales in the third quarter of fiscal 2012. The increase resulted primarily from a shift of marketing expenditures from the first and second quarters to the third quarter.

Fiscal year 2013 and long-term outlook

Commenting on the Company's outlook for the remainder of fiscal 2013, and looking ahead to the long-term outlook, Steve Davis said, "During the third quarter, we undertook extremely significant restructuring and repositioning activities while growing the core business.  We believe these initiatives position us well for sustainable profitable growth going forward.  To summarize:

  • Bob Evans Farms, Inc. is now anchored by two strong business segments sharing a common brand name with clear strategies to drive top-line growth;
  • BEF Foods has successfully integrated its most recent acquisition, positioning the segment to be nearly 90 percent vertically integrated, which will result in productivity improvements and a higher level of product innovation;
  • Bob Evans Restaurants and BEF Foods have productivity initiatives in place that are expected to drive efficiency and cost savings in nearly every line of their income statements; and
  • the Company has restructured its organizational and capital structures to realize efficiencies, a one-time tax benefit, and ongoing interest expense savings.

"We will continue to provide as much visibility as we can to our strategies, activities and expectations as we move through this transitional period.  We are fully committed to growing earnings per share 8 to 12 percent annually over the long term and believe we are in a much better position today to consistently deliver earnings growth."

The Company updated its guidance for the fourth quarter of the year to be in the range of $0.60 to $0.65 per diluted share.  This includes approximately $0.03 per share of costs associated with transition support services being provided to Mimi's Cafe at less than cost.  It also excludes Mimi's Cafe's results in the fourth quarter.

This outlook relies on a number of important assumptions, including the risk factors discussed in the Company's securities filings. Particular assumptions for the Company's full-year outlook include the following:

Consolidated company highlights

  • Net sales approximately $1.6 billion.
  • Depreciation and amortization – approximately $80 to $90 million.
  • Net interest expense – approximately $6.5 to $7.5 million, down from $8.0 to $9.0 million, to reflect the impact of the prepayment of the Company's private placement notes and decrease in net interest expense from borrowing under our lower-cost revolver debt. 
  • Effective non-GAAP tax rate approximately 32 percent down from 33.5 to 34.5 percent.
  • Diluted weighted-average share count approximately 28.3 million to reflect the impact of the third quarter share repurchase activity.
  • Capital expenditures approximately $130 to $150 million. Key items of the spend include the effect of expanding the Kettle Creations and Sulphur Springs plants, the acceleration of the Farm Fresh Refresh remodeling program, the new corporate campus and the ERP program.

Bob Evans Restaurants segment 

  • Net sales: Fourth quarter same-store sales in the flat to positive 1.0 percent range, driven by the sales lift from Farm Fresh Refresh remodels and new value platforms, offset by early February sales weakness.  The Company believes the sales weakness was due to a reaction by guests to recent tax increases and an extended string of snowy and bitterly cold days in the core Midwest markets that kept a portion of our target population at home.  The trend began to moderate in mid-February and the Company expects to return to same-store sales growth by the end of the quarter.  The Company will have approximately 510 closed store days during the fourth quarter to support the refresh program compared with 307 last year.  
  • Cost of sales: Commodity inflation at 1.0 to 2.0 percent.  Although volatility is increasing, price increases are not expected at the level we originally forecasted.
  • Operating margins: 9.0 to 9.5 percent, consistent with previous guidance and reflecting the accelerated Farm Fresh Refresh remodeling program, and the early February sales impact previously mentioned. 

BEF Foods segment

  • Net sales: Overall net sales of $80 to $90 million for the fourth quarter, up from last year's fourth quarter of $73 million.
  • Cost of sales: Based on recent cost trends, and liquidations in the sow herd as a result of the drought, average sow costs of approximately $55 to $60 per hundredweight – unchanged from the last forecast.  During the third quarter, sow costs were $58.72 per hundredweight. 
  • Operating margins: 9.5 to 10.5 percent, compared to previous guidance of 9.5 to 11.0 percent, as a result of an expectation of some continuing effects from the supplier issue mentioned earlier.

On May 29, 2012, the Company announced its intention to close two BEF Foods' production plants in the second quarter of fiscal 2014.  Partial realization of the pretax benefits of the closures, amounting to an estimated $4 to $5 million, is expected to commence in fiscal 2014. The Company anticipates a total annual ongoing pretax benefit of approximately $7 to $8 million beginning in fiscal 2015.

Company to host conference call on Wednesday, February 20, 2013
The Company will host a conference call to discuss its third-quarter fiscal 2013 results at 10 a.m. (ET) on Wednesday, February 20, 2013. The dial-in number is (800) 690-3108, access code 91638474. A replay will be available at (800) 585-8367, access code 91638474. 

To access the simultaneous webcast, go to www.bobevans.com/ir. The archived webcast will also be available on the Web site.

About Bob Evans Farms, Inc.
Bob Evans Farms, Inc. owns and operates full-service restaurants under the Bob Evans Restaurants and Mimi's Cafe brand names. At the end of the third fiscal quarter (January 25, 2013), Bob Evans Restaurants owned and operated 565 family restaurants in 19 states, primarily in the Midwest, mid-Atlantic and Southeast regions of the United States, while Mimi's Cafe owned and operated 145 casual restaurants located in 24 states, primarily in California and other western 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 complementary convenience food items under the Bob Evans and Owens brand names.  Note that effective on February 16, 2013, Mimi's Cafe is no longer owned by Bob Evans Farms, Inc.  For more information about Bob Evans Farms, Inc., visit www.bobevans.com.

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 27, 2012, 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.

 

Bob Evans Farms, Inc.
Earnings Release Fact Sheet (unaudited)
Fiscal 2013 – Quarter 3

Note: amounts are in thousands, except per share amounts

Third quarter (Q3), ended Jan. 25, 2013, compared to the corresponding period a year ago:



GAAP to NON-GAAP Reconciliation of Operating Income (Unaudited)



Three Months Ended


Nine Months Ended



Jan 25, 2013


Jan 27, 2012


Jan 25, 2013


Jan 27, 2012

Operating income as reported









    Bob Evans Restaurants

$

17,638

$

19,889

$

55,449

$

63,865

    Mimi's Cafe


134,357


3,222


126,001


(1,544)

    BEF Foods


(153,641)


7,147


(141,075)


16,762










    Total operating (loss) income


(1,646)


30,258


40,375


79,083

Adjustments









    Bob Evans Restaurants









        Impairment


2,371


-


3,598


2,806

        Severance/Restructuring


253


-


1,050


-

        (Gain) loss on sale of assets


(211)


-


(408)


(407)

        Extinguishment of intercompany debt


(527)


-


(527)


-










        Total Bob Evans Restaurants Adjustments


1,886


-


3,713


2,399

    Mimi's Cafe









        Impairment


24,834


-


24,834


-

        Severance/Restructuring


1,121


-


1,740


287

        Occupancy costs


334


-


1,875


-

        Extinguishment of intercompany debt


(156,418)


-


(156,418)


-

        Depreciation and amortization


(3,924)


-


(3,924)


-










        Total Mimi's Cafe  Adjustments


(134,053)


-


(131,893)


287

    BEF Foods









        Impairment


-


-


-


87

        Severance/Restructuring


1,239


-


5,184


-

        Merger and acquisition related costs


167


-


1,566


-

        (Gain) loss on sale of assets


-


-


(5)


(689)

        Extinguishment of intercompany debt


156,945


-


156,945


-










        Total BEF Foods Adjustments


158,351


-


163,690


(602)

Total adjustments









        Impairment


27,205


-


28,432


2,893

        Severance/Restructuring


2,613


-


7,974


287

        Merger and acquisition related costs


167


-


1,566


-

        (Gain) loss on sale of assets


(211)


-


(413)


(1,096)

        Occupancy costs


334


-


1,875


-

        Depreciation and amortization


(3,924)


-


(3,924)


-












26,184


-


35,510


2,084

Adjusted operating income









    Bob Evans Restaurants


19,524


19,889


59,162


66,264

    Mimi's Cafe


304


3,222


(5,892)


(1,257)

    BEF Foods


4,710


7,147


22,615


16,160










    Total adjusted operating income

$

24,538

$

30,258

$

75,885

$

81,167

 



Consolidated


Bob Evans Restaurants


Three Months Ended


Three Months Ended



Jan 25, 2013


% of Sales


Jan 27, 2012


% of Sales


Jan 25, 2013


% of Sales


Jan 27, 2012


% of Sales

Operating (loss) income as reported


































Net sales

$

434,440



$

428,339



$

245,494



$

242,360



Cost of sales


134,771


31.0%


137,657


32.1%


59,561


24.3%


58,377


24.1%

Operating wages


137,327


31.6%


133,575


31.2%


92,115


37.5%


92,365


38.1%

Other operating


72,070


16.6%


69,906


16.3%


43,476


17.7%


44,604


18.4%

SG&A


50,407


11.6%


36,634


8.6%


19,271


7.8%


15,017


6.2%

Depreciation and amortization


18,844


4.3%


20,309


4.7%


13,433


5.5%


12,108


5.0%

Intangible impairment


22,667


5.2%


-




-




-




















Total as reported


(1,646)


-0.4%


30,258


7.1%


17,638


7.2%


19,889


8.2%

Adjustments

















Other operating


(334)




-




-




-



SG&A


(7,107)




-




(1,886)




-



Depreciation and amortization


3,924




-




-




-



Intangible impairment


(22,667)




-




-




-




















Total adjustments


26,184




-




1,886




-




















Adjusted operating income


































Net sales


434,440




428,339




245,494




242,360



Cost of sales


134,771


31.0%


137,657


32.1%


59,561


24.3%


58,377


24.1%

Operating wages


137,327


31.6%


133,575


31.2%


92,115


37.5%


92,365


38.1%

Other operating


71,736


16.5%


69,906


16.3%


43,476


17.7%


44,604


18.4%

SG&A


43,300


10.0%


36,634


8.6%


17,385


7.1%


15,017


6.2%

Depreciation and amortization


22,768


5.2%


20,309


4.7%


13,433


5.5%


12,108


5.0%


















Total adjusted operating income


24,538


5.6%


30,258


7.1%


19,524


8.0%


19,889


8.2%


















Net interest expense as reported


7,451




1,879











Adjustments


(6,150)




-











Adjusted net interest expense


1,301




1,879











(Loss) income before income taxes as reported


(9,097)




28,379











Adjustments


32,334




-











Adjusted income before income taxes


23,238




28,379











(Benefit) provision for income taxes as reported


(14,624)




8,124











Income tax effect of adjustment


22,044




-











Adjusted provision for income taxes


7,419




8,124











Net income as reported


5,527




20,255











Adjustments to net income


10,291




-











Adjusted net income


15,818




20,255











Earnings per share

















Basic as reported

$

0.20



$

0.69











Adjustments

$

0.37



$

-











Adjusted basic

$

0.57



$

0.69




























Diluted as reported

$

0.20



$

0.69











Adjustments

$

0.37



$

-











Adjusted diluted

$

0.56



$

0.69




























Average shares outstanding

















    Basic


27,994




29,319











    Diluted


28,136




29,415











 




Mimi's Cafe


BEF Foods



Three Months Ended


Three Months Ended



Jan 25, 2013


% of Sales


Jan 27, 2012


% of Sales


Jan 25, 2013


% of Sales


Jan 27, 2012


% of Sales

Operating income (loss) as reported


































Net sales

$

91,119



$

94,948



$

97,827



$

91,031



Cost of sales


23,422


25.7%


25,829


27.2%


51,788


52.9%


53,450


58.7%

Operating wages


34,382


37.7%


34,073


35.9%


10,830


11.1%


7,137


7.8%

Other operating


20,854


22.9%


20,099


21.2%


7,740


7.9%


5,203


5.7%

SG&A


(146,438)


-160.7%


5,849


6.2%


177,575


181.5%


15,768


17.3%

Depreciation and amortization


1,875


2.1%


5,876


6.2%


3,536


3.6%


2,324


2.6%

Intangible impairment


22,667


24.9%


-




-




-



Total as reported


134,357


147.5%


3,222


3.4%


(153,641)


-157.1%


7,147


7.9%


















Adjustments


































Other operating


(334)




-




-




-



SG&A


153,130




-




(158,351)




-



Depreciation and amortization


3,924




-




-




-



Intangible impairment


(22,667)




-




-




-




















Total adjustments


(134,053)




-




158,351




-




















Adjusted operating income


































Net sales


91,119




94,948




97,827




91,031



Cost of sales


23,422


25.7%


25,829


27.2%


51,788


52.9%


53,450


58.7%

Operating wages


34,382


37.7%


34,073


35.9%


10,830


11.1%


7,137


7.8%

Other operating


20,521


22.5%


20,099


21.2%


7,740


7.9%


5,203


5.7%

SG&A


6,693


7.3%


5,849


6.2%


19,224


19.7%


15,768


17.3%

Depreciation and amortization


5,798


6.4%


5,876


6.2%


3,536


3.6%


2,324


2.6%


















Total adjusted operating income


304


0.3%


3,222


3.4%


4,710


4.8%


7,147


7.9%


















 




Consolidated


Bob Evans Restaurants



Nine Months Ended


Nine Months Ended



Jan 25, 2013


% of Sales


Jan 27, 2012


% of Sales


Jan 25, 2013


% of Sales


Jan 27, 2012


% of Sales

Operating income as reported

















Net sales

$

1,255,032



$

1,240,885



$

739,762



$

728,949



Cost of sales


374,847


29.9%


384,586


31.0%


177,662


24.0%


173,079


23.7%

Operating wages


403,646


32.2%


399,422


32.2%


277,573


37.5%


277,386


38.1%

Other operating


217,288


17.3%


206,342


16.6%


133,787


18.1%


130,520


17.9%

SG&A


134,382


10.7%


110,525


8.9%


55,964


7.6%


47,685


6.5%

Depreciation and amortization


61,827


4.9%


60,927


4.9%


39,327


5.3%


36,415


5.0%

Intangible impairment


22,667


1.8%


-




-




-




















Total as reported


40,375


3.2%


79,083


6.4%


55,449


7.5%


63,865


8.8%

Adjustments

















Other operating


(1,875)




-




-




-



SG&A


(14,892)




(2,084)




(3,713)




(2,399)



Depreciation and amortization


3,924




-




-




-



Intangible impairment


(22,667)




-




-




-




















Total adjustments


35,510




2,084




3,713




2,399




















Adjusted operating income

















Net sales


1,255,032




1,240,885




739,762




728,949



Cost of sales


374,847


29.9%


384,586


31.0%


177,662


24.0%


173,079


23.7%

Operating wages


403,646


32.2%


399,422


32.2%


277,573


37.5%


277,386


38.1%

Other operating


215,413


17.2%


206,342


16.6%


133,787


18.1%


130,520


17.9%

SG&A


119,490


9.5%


108,441


8.7%


52,251


7.1%


45,286


6.2%

Depreciation and amortization


65,750


5.2%


60,927


4.9%


39,327


5.3%


36,415


5.0%


















Total adjusted operating income


75,885


6.0%


81,167


6.5%


59,162


8.0%


66,264


9.1%


















Net interest expense as reported


10,980




5,975











Adjustments


(6,150)




-











Adjusted net interest expense


4,830




5,975











Income before income taxes as reported


29,395




73,108











Adjustments


41,660




2,084











Adjusted income before income taxes


71,055




75,192











Provision for income taxes as reported


(1,482)




22,294











Income tax effect of adjustment


25,214




711











Adjusted provision for income taxes


23,732




23,005











Net income as reported


30,877




50,814











 Adjustments


16,446




1,373











 Adjusted net income


47,323




52,187











 Earnings per share

















Basic as reported

$

1.09



$

1.70











Adjustments

$

0.58



$

0.05











Adjusted basic

$

1.68



$

1.74











Diluted as reported

$

1.09



$

1.69











Adjustments

$

0.58



$

0.05











Adjusted diluted

$

1.67



$

1.74











Average shares outstanding

















Basic


28,203




29,909











Diluted


28,345




29,999











 




Mimi's Cafe


BEF Foods



Nine Months Ended


Nine Months Ended



Jan 25, 2013


% of Sales


Jan 27, 2012


% of Sales


Jan 25, 2013


% of Sales


Jan 27, 2012


% of Sales

Operating income as reported


































Net sales

$

258,715



$

270,385



$

256,555



$

241,551



Cost of sales


67,680


26.2%


72,781


26.9%


129,506


50.5%


138,726


57.4%

Operating wages


98,621


38.1%


100,401


37.1%


27,452


10.7%


21,635


9.0%

Other operating


63,033


24.4%


61,865


22.9%


20,467


8.0%


13,957


5.8%

SG&A


(132,632)


-51.3%


19,220


7.1%


211,050


82.3%


43,620


18.1%

Depreciation and amortization


13,344


5.2%


17,661


6.5%


9,155


3.6%


6,851


2.8%

Intangible impairment


22,667


8.8%


-




-




-




















Total as reported


126,001


48.7%


(1,544)


-0.6%


(141,075)


-55.0%


16,762


6.9%


















Adjustments


































Other operating


(1,875)




-




-




-



SG&A


152,511




(287)




(163,690)




602



Depreciation and amortization


3,924




-




-




-



Intangible impairment


(22,667)




-




-




-




















Total adjustments


(131,893)




287




163,690




(602)




















Adjusted operating income


































Net sales


258,715




270,385




256,555




241,551



Cost of sales


67,680


26.2%


72,781


26.9%


129,506


50.5%


138,726


57.4%

Operating wages


98,621


38.1%


100,401


37.1%


27,452


10.7%


21,635


9.0%

Other operating


61,159


23.6%


61,865


22.9%


20,467


8.0%


13,957


5.8%

SG&A


19,879


7.7%


18,933


7.0%


47,360


18.5%


44,222


18.3%

Depreciation and amortization


17,268


6.7%


17,661


6.5%


9,155


3.6%


6,851


2.8%


















Total adjusted operating (loss) income


(5,892)


-2.3%


(1,257)


-0.5%


22,615


8.8%


16,160


6.7%

 



Consolidated Results



Three Months Ended



Jan. 25, 2013


% of sales


Jan. 27, 2012


% of sales

Net sales

$

434,440



$

428,339












Cost of sales


134,771


31.0%


137,657


32.1%

Operating wages


137,327


31.6%


133,575


31.2%

Other operating


72,070


16.6%


69,906


16.3%

S,G&A


50,407


11.6%


36,634


8.6%

Depreciation and amortization


18,844


4.3%


20,309


4.7%

Intangible impairment


22,667


5.2%


-


0.0%










Operating (loss) income


(1,646)


-0.4%


30,258


7.1%










Interest


7,451


1.7%


1,879


0.5%










Pre-tax (loss) income


(9,097)


-2.1%


28,379


6.6%










(Benefit) provision for income taxes


(14,624)


-3.4%


8,124


1.9%










Net Income

$

5,527


1.3%

$

20,255


4.7%










EPS - basic

$

0.20



$

0.69



EPS - diluted

$

0.20



$

0.69












Dividends paid per share:


$

0.275



$

0.250












Weighted average shares outstanding:












Basic


27,994




29,319



Dilutive stock options


142




96



Diluted


28,136




29,415












Shares outstanding at quarter end:


27,879




29,072












Income taxes, as a percentage of pre-tax income, were 160.8% vs. 28.6%





 


Segment Results


Three Months Ended



Bob Evans Restaurants


Mimi's Cafe


BEF Foods



Jan. 25, 2013


Jan. 27, 2012


Jan. 25, 2013


Jan. 27, 2012


Jan. 25, 2013


Jan. 27, 2012

Net sales

$

245,494

$

242,360

$

91,119

$

94,948

$

97,827

$

91,031














Cost of sales


24.3%


24.1%


25.7%


27.2%


52.9%


58.7%

Operating wages


37.5%


38.1%


37.7%


35.9%


11.1%


7.8%

Other operating


17.7%


18.4%


22.9%


21.2%


7.9%


5.7%

S,G&A


7.8%


6.2%


-160.7%


6.2%


181.5%


17.3%

Depreciation and amortization


5.5%


5.0%


2.1%


6.2%


3.6%


2.6%

Intangible impairment


0.0%


0.0%


24.9%


0.0%


0.0%


0.0%














Operating income (loss)


7.2%


8.2%


147.5%


3.4%


-157.1%


7.9%



























 



Consolidated Results


Nine Months Ended



Jan. 25, 2013


% of sales


Jan. 27, 2012


% of sales

Net sales

$

1,255,032



$

1,240,885












Cost of sales


374,847


29.9%


384,586


31.0%

Operating wages


403,646


32.2%


399,422


32.2%

Other operating


217,288


17.3%


206,342


16.6%

S,G&A


134,382


10.7%


110,525


8.9%

Depreciation and amortization


61,827


4.9%


60,927


4.9%

Intangible impairment


22,667


1.8%


-


0.0%










Operating income


40,375


3.2%


79,083


6.4%










Interest


10,980


0.9%


5,975


0.5%










Pre-tax income


29,395


2.3%


73,108


5.9%










(Benefit) provision for income taxes


(1,482)


-0.1%


22,294


1.8%










Net Income

$

30,877


2.5%

$

50,814


4.1%










EPS - basic

$

1.09



$

1.70



EPS - diluted

$

1.09



$

1.69












Dividends paid per share:

$

0.800



$

0.700












Weighted average shares outstanding:












Basic


28,203




29,909



Dilutive stock options


142




90



Diluted


28,345




29,999












Shares outstanding at quarter end:


27,879




29,072












Income taxes, as a percentage of pre-tax income, were -5.0% vs.30.5%

 



Segment Results


Nine Months Ended



Bob Evans Restaurants


Mimi's Cafe


BEF Foods



Jan. 25, 2013


Jan. 27, 2012


Jan. 25, 2013


Jan. 27, 2012


Jan. 25, 2013


Jan. 27, 2012

Net sales

$

739,762

$

728,949

$

258,715

$

270,385

$

256,555

$

241,551














Cost of sales


24.0%


23.7%


26.2%


26.9%


50.5%


57.4%

Operating wages


37.5%


38.1%


38.1%


37.1%


10.7%


9.0%

Other operating


18.1%


17.9%


24.4%


22.9%


8.0%


5.8%

S,G&A


7.6%


6.5%


-51.3%


7.1%


82.3%


18.1%

Depreciation and amortization


5.3%


5.0%


5.2%


6.5%


3.6%


2.8%

Intangible impairment


0.0%


0.0%


8.8%


0.0%


0.0%


0.0%














Operating income (loss)


7.5%


8.8%


48.7%


-0.6%


-55.0%


6.9%<