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

• Q1 2017 net sales total $306.3 million; GAAP net income of $0.46 per diluted share,  non-GAAP net income⁽¹⁾ of $0.48 per diluted share
   
• BEF Foods reports Q1 side-dish and sausage volume growth of 12.5 percent and 4.9 percent, respectively.  Side-dish manufacturing facility expansion complete and ready to support continued volume gains, particularly in West Coast growth markets
   
• Bob Evans Restaurants’ Q1 same-store sales decline 4.3 percent, Q2-to-date same-store sales declines through August 29, moderate to -2.0 percent, following hospitality and food quality improvements.  Comprehensive menu redesign launches system-wide September 1
   
• Company raises fiscal year 2017 diluted EPS guidance range to $2.00 to $2.17 on a GAAP basis, and $2.05 to $2.20 on a non-GAAP basis
   
• Quarterly dividend of $0.34 per share payable on September 19, 2016, to stockholders of record at the close of business on September 5, 2016

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

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

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

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

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

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

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

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

First-quarter fiscal 2017 taxes –  The Company’s provision for income taxes is based on a current estimate of the annual effective income tax rate adjusted to reflect the impact of discrete items. The Company recognized GAAP tax expense of 22.4 percent for the quarter, compared to 24.3 percent in the corresponding period last year. The decrease in the tax rate was driven primarily by the impact of yearly variances in the forecasted annual rate related to wage credits, the domestic productions activities deduction, and officers’ life insurance.  For non-GAAP items, the tax rate was 22.6 percent, reflecting the Company’s annual non-GAAP estimated tax rate adjusted for the impact of first quarter discrete items.

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

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

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

This outlook is subject to a number of factors beyond the Company’s control, including the risk factors discussed in the Company’s fiscal 2016 Annual Report on Form 10‑K and its other subsequent filings with the Securities and Exchange Commission. 

Investor Conference Call
The Company will host a conference call to discuss its first-quarter fiscal 2017 results at 8:30 a.m. (ET) on Wednesday, August 31, 2016.  The dial-in number for the conference call is (855) 468-0551, access code 60710233.  A replay will be available at (800) 585-8367, access code 60710233.

A simultaneous webcast will be available at 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 29, 2016, and in our other filings with the Securities and Exchange Commission. We note these factors for investors as contemplated by the Private Securities Litigation Reform Act of 1995. Predicting or identifying all such risk factors is impossible. Consequently, investors should not consider any such list to be a complete set of all potential risks and uncertainties.  Any strategic transaction with respect to our restaurant real estate remains subject to closing conditions and there can be no assurance of such a closing.  Forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to update any forward-looking statement to reflect circumstances or events that occur after the date of the statement to reflect unanticipated events. All subsequent written and oral forward-looking statements attributable to us or any person acting on behalf of the Company are qualified by the cautionary statements in this section.

About Bob Evans Farms, Inc.
Bob Evans Farms, Inc. owns and operates full-service restaurants under the Bob Evans Restaurants brand name.  At the end of the first fiscal quarter (July 29, 2016), Bob Evans Restaurants owned and operated 522 family restaurants in 18 states, primarily in the Midwest, mid-Atlantic and Southeast regions of the United States. Bob Evans Farms, Inc., through its BEF Foods segment, is also a leading producer and distributor of refrigerated side dishes, pork sausage and a variety of refrigerated and frozen convenience food items under the Bob Evans and Owens brand names.  For more information about Bob Evans Farms, Inc., visit www.bobevans.com. 

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