Bob Evans to Sell Mimi's Cafe for $50M; Sees Q3 Adj. EPS $0.51-0.57
Bob Evans Farms, Inc. (NASDAQ: BOBE) ("Bob Evans") today announced it had entered into a definitive agreement for the sale of its Mimi's Cafe restaurant chain to LeDuff America, Inc. ("LDA") .
The purchase price for the transaction is $50.0 million, consisting of $20.0 million in cash and a note for $30.0 million, subject to customary purchase price allocations and adjustments as of closing. The transaction is subject to customary closing conditions and is expected to be completed within the next 45 days.
The Company also said it expects to provide certain transitional support services on a contractual basis to Mimi's Cafe during a period following the close of the transaction. LDA intends to continue operating and managing the company out of its current Irvine, California office.
Bob Evans Comments on Outlook for Third Quarter of Fiscal 2013
Bob Evans also said today that revenue for the third quarter of fiscal 2013 will exceed last year's third quarter driven by positive sales growth in both the Bob Evans Restaurants and Bob Evans Foods segments. The third quarter of fiscal 2013 will be the last period for which Mimi's Cafe is included within the Company's non-GAAP consolidated results. During the quarter, the Company also announced early payment of its private placement notes, and the conversions of its restaurant operating companies to a LLC structure. Among the benefits expected from the payment of the notes is reduced interest expense on a go-forward basis. The conversions of the restaurant operating companies to a LLC structure are expected to generate a cash tax benefit of $53 to $63 million to be realized over the next few years. The cash tax benefit arises from a write-down of the tax basis of the Company's investment in Mimi's Cafe. The cash tax benefits are not expected to permanently change the Company's tax rate.
The Company's non-GAAP earnings for the quarter will be negatively impacted by several non-continuing factors affecting each of our segments, and the timing of marketing expenses within the Bob Evans Foods segment. The non-continuing factors include: a decline in performance at Mimi's Cafe due, in part, to reduced operational focus resulting from the announcement of the strategic review process; a weather related impact on guest traffic, sales, labor and direct operating expenses at Bob Evans Restaurants during the month of December; and one-time costs associated with in-sourcing production of a key refrigerated side dish product line at Bob Evans Foods. Furthermore, the Company made a strategic decision to shift Bob Evans Foods' marketing spending from the first and second fiscal quarters to the third quarter to better align those expenditures with demand during the key holiday period. Reflecting primarily the aforementioned factors, the Company expects to report non-GAAP earnings of between $0.51 to $0.57 per share for the third quarter ending January 25, 2013. Last year's third quarter results included the benefit of a state income tax settlement equating to $0.05 per diluted share. Further details regarding third quarter performance and a revised outlook for the fourth quarter of fiscal 2013 incorporating the impact of this event, including the transitional support service agreement with the buyer that is not likely to fully offset the costs associated with delivering those services, will be addressed within the Company's earnings release for the third quarter of fiscal 2013 to be issued after 4 p.m. (ET) on February 19, 2013.
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