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

  • Q2 2016 net sales total $325.0 million. GAAP net income of $0.29 per diluted share, non-GAAP net income(1) of $0.41 per diluted share, representing increases of 16 percent and 14 percent, respectively. GAAP consolidated operating income increased nearly 27 percent and non-GAAP consolidated operating income increased 19 percent compared to the prior-year period
  • Company reaffirms fiscal year 2016 non-GAAP diluted EPS guidance range of $1.85 to $2.00

  • BEF Foods’ Q2 2016 non-GAAP operating income increases 176 percent compared to the prior-year period. Retail pounds sold increase 12.6 percent. Refrigerated side dish products comprised more than 50 percent of total pounds sold, an historic high

  • Bob Evans Restaurants’ Q2 2016 non-GAAP operating income declines 34 percent compared to the prior-year period. New menu and products being introduced to drive sales and profit growth

  • Company repurchased $44.4 million (1.0 million shares) during Q2 2016 and $27.0 million (0.6 million shares) during Q3 through November 30, 2015, bringing fiscal 2016 share repurchases to $131.9 million (2.9 million shares)

  • Board approves $100 million increase in share repurchase authorization to $250 million, from $150 million previously

  • Board approves a 9.7 percent quarterly dividend increase to $0.34 per share payable on December 14, 2015, to stockholders of record at the close of business on November 30, 2015

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

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

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

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

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

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

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

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

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


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

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

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

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

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

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

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

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

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

Summary of performance drivers: fiscal 2016 guidance versus fiscal 2015

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


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


This outlook is subject to a number of factors beyond the Company’s control, including the risk factors discussed in the Company’s fiscal 2015 Annual Report on Form 10‑K and its other subsequent filings with the Securities and Exchange Commission.

Investor Conference Call
The Company will host a conference call to discuss its second-quarter fiscal 2016 results at 10 a.m. (ET) on Wednesday, December 2, 2015. The dial-in number is (855) 468-0551, access code 77827034. A replay will be available at (800) 585-8367, access code 77827034.

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

(1)Non-GAAP Financial Measures
The Company uses non-GAAP financial measures to monitor and evaluate the ongoing performance of the Company. The Company believes the additional measures are useful to investors for financial analysis. Excluding these items reflects operating results that are more indicative of the Company’s ongoing operating performance and improve comparability to prior periods. However, non-GAAP measures are not in accordance with, nor are they a substitute for, GAAP measures. Reconciliations to the applicable GAAP financial measures are included in the attached schedules.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
Certain statements in this news release that are not historical facts are forward-looking statements. Forward-looking statements involve various important assumptions, risks and uncertainties. Actual results may differ materially from those predicted by the forward-looking statements because of various factors and possible events. We discuss these factors and events, along with certain other risks, uncertainties and assumptions, under the heading “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the fiscal year ended April 24, 2015, and in our other filings with the Securities and Exchange Commission. We note these factors for investors as contemplated by the Private Securities Litigation Reform Act of 1995. Predicting or identifying all such risk factors is impossible. Consequently, investors should not consider any such list to be a complete set of all potential risks and uncertainties. Any strategic transaction with respect to our headquarters or a portion of our restaurant real estate remains subject to evaluation by the Board and there can be no assurance if and when any such transaction will be undertaken or consummated. Forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to update any forward-looking statement to reflect circumstances or events that occur after the date of the statement to reflect unanticipated events. All subsequent written and oral forward-looking statements attributable to us or any person acting on behalf of the Company are qualified by the cautionary statements in this section.

About Bob Evans Farms, Inc.
Bob Evans Farms, Inc. owns and operates full-service restaurants under the Bob Evans Restaurants brand name. At the end of the second fiscal quarter (October 23, 2015), Bob Evans Restaurants owned and operated 547 family restaurants in 18 states, primarily in the Midwest, mid-Atlantic and Southeast regions of the United States. Bob Evans Farms, Inc., through its BEF Foods segment, is also a leading producer and distributor of refrigerated side dishes, pork sausage and a variety of refrigerated and frozen convenience food items under the Bob Evans and Owens brand names. For more information about Bob Evans Farms, Inc., visit www.bobevans.com.

Broasted® is a registered trademark of The Broaster Company, LLC.

BOBE–E

Bob Evans Farms, Inc.
Earnings Release Fact Sheet (unaudited)
Second quarter Fiscal 2016, three months ended October 23, 2015, compared to the corresponding period a year ago:

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


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

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


(in thousands)Three Months Ended
BEF Foods Corporate and Other
October
23, 2015
% of
Sales
October
24, 2014
% of
Sales
October
23, 2015
October
24, 2014
Operating income (loss) as reported
Net Sales$94,280 $92,128 $ $
Cost of sales40,984 43.5% 51,847 56.3%
Operating wage and fringe benefit expenses10,943 11.7% 10,779 11.7%
Other operating expenses13,197 14.0% 11,905 12.9%
Selling, general and administrative expenses10,964 11.6% 6,918 7.5% 13,505 16,482
Depreciation and amortization expense4,195 4.4% 4,323 4.7% 2,381 1,489
Impairments % %
Total as Reported13,997 14.8% 6,356 6.9% (15,886) (17,971)
Adjustments
Net Sales
Cost of sales
Operating wage and fringe benefit expenses
Other operating expenses
Selling, general and administrative expenses(3,606) (17) (3,725)
Depreciation and amortization expense
Impairments
Total adjustments3,606 17 3,725
Non-GAAP operating income (loss)
Net Sales94,280 92,128
Cost of sales40,984 43.5% 51,847 56.3%
Operating wage and fringe benefit expenses10,943 11.7% 10,779 11.7%
Other operating expenses13,197 14.0% 11,905 12.9%
Selling, general and administrative expenses7,358 7.7% 6,901 7.5% 13,505 12,757
Depreciation and amortization expense4,195 4.4% 4,323 4.7% 2,381 1,489
Impairments % %
Total non-GAAP operating income (loss)$17,603 18.7% $6,373 6.9% $(15,886) $(14,246)


Bob Evans Farms, Inc.

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

(in thousands, except per share amounts) Basic EPS Diluted EPS
Six Months Ended Six Months Ended Six Months Ended
October 23,
2015
October 24,
2014
October 23,
2015
October 24,
2014
October 23,
2015
October 24,
2014
Operating Income (Loss) as Reported
Bob Evans Restaurants$23,132 $35,555
BEF Foods29,834 9,401
Corporate and Other(33,270) (35,880)
Operating Income19,696 9,076
Net interest expense5,489 3,819
Income Before Income Taxes14,207 5,257
Provision for income taxes3,496 234
Net Income as reported10,711 5,023 $0.48 $0.21 $0.47 $0.21
Adjustments
Bob Evans Restaurants
Impairments 1,577
Severance/Restructuring318 91
Activism, Strategic Initiatives and Other 300
Litigation Reserves10,500
10,818 1,968
BEF Foods
Severance/Restructuring 667
Loss on Sale of Assets3,606
Activism, Strategic Initiatives and Other 17
3,606 684
Corporate and Other
Severance/Restructuring 191
Loss on Sale of Assets 118
Activism, Strategic Initiatives and Other 5,948
6,257
Total adjustments
Impairments 1,577
Severance/Restructuring318 949
Loss on Sale of Assets3,606 118
Activism, Strategic Initiatives and Other 6,265
Litigation Reserves10,500
14,424 8,909
Non-GAAP operating income (loss)
Bob Evans Restaurants33,950 37,523
BEF Foods33,440 10,085
Corporate and Other(33,270) (29,623)
Total non-GAAP operating income34,120 17,985
Adjustments to net interest expense(480) 903
Non-GAAP net interest expense5,009 4,722
Non-GAAP Income Before Taxes29,111 13,263
Adjustments to income tax provision4,712 2,094
Non-GAAP Provision for Income Taxes8,208 2,328
Non-GAAP Net Income$20,903 $10,935 $0.93 $0.47 $0.93 $0.46
Weighted Average Shares Outstanding 22,421 23,467 22,572 23,698


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

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


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


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


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

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


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


(in thousands, except per share amounts)Consolidated Results
Six Months Ended
October 23, 2015 % of
sales
October 24, 2014 % of
sales
Net sales$646,734 $659,619
Cost of sales199,030 30.8% 230,180 34.9%
Operating wage and fringe benefit expenses209,287 32.4% 210,042 31.8%
Other operating expenses107,815 16.7% 107,909 16.4%
Selling, general and administrative expenses70,361 10.9% 61,387 9.3%
Depreciation and amortization expense40,260 6.2% 39,448 6.0%
Impairments285 % 1,577 0.2%
Operating Income19,696 3.0% 9,076 1.4%
Net interest expense5,489 0.8% 3,819 0.6%
Income Before Income Taxes14,207 2.2% 5,257 0.8%
Provision for income taxes3,496 0.5% 234 %
Net Income$10,711 1.7% 5,023 0.8%
Earnings Per Share
Basic$0.48 $0.21
Diluted$0.47 $0.21
Cash dividends paid per share$0.62 $0.62
Weighted average shares outstanding
Basic22,421 23,467
Dilutive Shares151 231
Diluted22,572 23,698
Shares outstanding at quarter end21,379 23,600


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

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


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


Consolidated Balance Sheets

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


Consolidated Statements of Cash Flows

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


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

Consolidated Bob Evans Restaurants BEF Foods Corporate and Other
S,G&A
Wage-Related$4.9 $1.9 $0.5 $2.5
Non Wage-Related0.8 0.4 0.4
Total S,G&A5.7 2.3 0.5 2.9
Non-S,G&A
Wage-Related0.2 0.2
Non Wage-Related1.5 1.5
Total Non-S,G&A1.7 1.7
Year to date total$7.4 $2.3 $2.2 $2.9


Bob Evans Restaurants openings and closings, by quarter

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

*Includes estimate for remaining quarters in fiscal 2016


Bob Evans Same-Store Sales Day Part Performance

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


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

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

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


Bob Evans Restaurants key restaurant sales data

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


BEF Foods historical sow cost review (average cost per hundredweight)
Fiscal Year Q1 Q2 Q3 Q4 Average
2016 $38.75 $53.31 $46.92
2015 $87.87 $78.82 $67.79 $43.02 $69.41
2014 $63.24 $77.33 $72.36 $78.47 $73.23
2013 $54.19 $43.22 $58.73 $59.07 $53.87
2012 $57.06 $67.82 $60.56 $60.41 $61.58
BEF Foods total pounds sold review (inclusive of pounds sold to Bob Evans Restaurants)
Fiscal Year Q1 Q2 Q3 Q4 Average
2016 0.4% 5.7% 3.1%
2015 (6.1)% (4.5)% 5.5% 0.9% (0.9)%
2014 13.0% 0.2% (11.1)% (6.9)% (2.4)%
2013 7.2% 16.1% 13.1% 21.4% 14.6%
2012 (2.7)% 3.1% 0.9% (1.3)% 0.1%
BEF Foods total pounds sold, by category
Fiscal 2016
Category Q1 Q2 Q3 Q4
Sides 49.6% 50.7%
Sausage 22.0% 22.3%
Food Service - External 14.1% 12.5%
Food Service - Intersegment 6.2% 6.6%
Frozen 4.6% 4.5%
Other 3.5% 3.4%
Fiscal 2015
Category Q1 Q2 Q3 Q4
Sides 42.5% 46.9% 48.0% 49.8%
Sausage 19.3% 20.5% 26.2% 23.7%
Food Service - External 24.0% 18.0% 12.8% 11.8%
Food Service - Intersegment 6.0% 6.0% 5.5% 5.8%
Frozen 4.6% 5.0% 4.1% 4.8%
Other 3.6% 3.6% 3.4% 4.1%


BEF Foods net sales review (dollars in thousands)

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


YTD 2016 YTD 2015
Gross sales$207,732 $199,478
Less: promotions26,925 17,992
Less: discounts1,833 1,902
Less: returns and slotting1,650 1,267
Net sales$177,324 $178,317

Contact: Scott C. Taggart Vice President, Investor Relations (614) 492-4954

Source:Bob Evans Farms, Inc.