Market Overview

Bob Evans Reports Fiscal 2017 Second-Quarter Results and Updates Fiscal 2017 Guidance

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  • Q2 2017 net sales total $316.0 million; GAAP net income of $0.01 per diluted share, non-GAAP net income(1) of $0.56 per diluted share.  A $16.0 million pretax impairment charge ($0.55 per diluted share) related to the note receivable from the 2013 sale of Mimi's Café is the primary difference between GAAP and non-GAAP results
     
  • BEF Foods reports Q2 side-dish and sausage pounds sold growth of 13.7 percent and 7.6 percent, respectively.  Household penetration increases 24 percent during the past year
     
  • Bob Evans Restaurants' sales trend continued to improve as Q2 same-store sales declined 1.8 percent with a new menu design, product upgrades, and improved hospitality continuing to enhance the guest experience
     
  • Company lowers fiscal year 2017 GAAP diluted EPS guidance range to $1.54 to $1.72 to reflect the note receivable impairment.  Raises non-GAAP range to $2.15 to $2.30 to reflect improved performance and updated projections
     
  • Quarterly dividend of $0.34 per share payable on December 23, 2016, to stockholders of record at the close of business on December 12, 2016.  Current share repurchase authorization extended through December 31, 2017

NEW ALBANY, Ohio, Dec. 05, 2016 (GLOBE NEWSWIRE) -- Bob Evans Farms, Inc. (NASDAQ: BOBE) today announced its financial results for the fiscal 2017 second quarter ended Friday, October 28, 2016.  On a GAAP basis, the Company reported net income of $0.2 million, or $0.01 per diluted share, compared with net income of $6.4 million, or $0.29 per diluted share, in the corresponding period last year.  After adjusting for the note impairment, non-GAAP net income was $11.2 million, or $0.56 per diluted share, compared with net income of $9.2 million, or $0.41 per diluted share, in the corresponding period last year.  For an explanation of certain non-GAAP financial measures used in this release, please refer to the discussion in "Non-GAAP Financial Measures" below.

Second-quarter fiscal 2017 commentary
President and Chief Executive Officer Saed Mohseni said, "BEF Foods delivered another excellent quarter with 13.7 percent volume growth of refrigerated side-dish products and 7.6 percent growth of our sausage business.  Both product lines achieved market share gains during the quarter.  Recent expansion of our side-dish production capacity and continued strategic use of our co-packer network, position us well for meeting peak holiday production demands during the third fiscal quarter.  We are evaluating additional growth opportunities, including investments in our plant network as well as acquisitions, to further improve manufacturing efficiency and production capacities as we aggressively target new product authorizations at our existing retailers, and new retail account authorizations, particularly on the West Coast and with national big-box chains.

"Bob Evans Restaurants' performance improved during the second quarter as same-store sales trends improved further and positive guest feedback trends reflected continued improvements to the guest experience.  We are encouraged that six states in the chain achieved positive same-store sales during the second quarter, compared to one state in the prior quarter.  Furthermore, the number of individual restaurants generating positive quarterly same-store sales increased 65 percent from the first quarter.  Our new menu, launched September 1, continues to perform as expected.  Although our value offerings have received more prominence in the new menu design, our average check has increased slightly as guests have taken advantage of the flexibility of the new menu to build a dining experience that best meets their appetite and budget."

Mohseni continued, "The Board continues to evaluate all options to create shareholder value and is working with J.P. Morgan to review and evaluate potential opportunities for value creation.  There is no formal timeline for the completion of the review and there can be no certainty that the review will result in a particular outcome." 

Second-quarter fiscal 2017 Bob Evans Restaurants segment summary
Bob Evans Restaurants' net sales were $219.8 million, a decline of $10.9 million, or 4.7 percent, compared to net sales of $230.7 million in the corresponding period last year. Same-store sales declined 1.8 percent with the balance of the net sales decline due to net restaurant closures during the past year. No restaurants were closed and no new restaurants opened during the quarter.  The Company operated 522 restaurants at the end of the quarter.

Same-Store Sales (SSS) Restaurants  August  September  October  Q2  FY '17
521 -2.0% -2.0% -1.4% -1.8%

Bob Evans Restaurants' GAAP operating income was $13.5 million, compared to GAAP operating income of $13.3 million last year.  Bob Evans Restaurants' non-GAAP operating income was $13.5 million, compared to $13.6 million last year, a decline of $0.1 million.  The decline in non-GAAP operating income was due to lower sales and increased hourly wage rates along with investment in labor hours to support efforts to improve guest hospitality; 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 million decline in depreciation compared to the prior year period. 

Second-quarter fiscal 2017 BEF Foods segment summary
BEF Foods' net sales were $96.2 million, an increase of $1.9 million, or 2.0 percent, compared to $94.3 million in the corresponding period last year.  Pounds sold increased 6.9 percent while average net selling price per pound declined 4.6 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 13.7 percent increase in side-dish pounds sold and a 7.6 percent increase in sausage pounds sold were partially offset by a $4.1 million increase in trade spending (reduces net sales), a 17.4 percent decline in frozen product pounds sold and a 5.8 percent decline in food service pounds sold compared to the corresponding period last year.

BEF Foods' GAAP operating income was $18.7 million, compared to $14.0 million last year.  Prior year GAAP operating income included a $3.6 million charge to reflect the loss on the sale-leaseback of the Sulphur Springs manufacturing facility.  BEF Foods non-GAAP operating income was $18.7 million, compared to $17.6 million in the corresponding period last year, an improvement of $1.1 million.  The improvement was due primarily to increased volume, $2.5 million of lower sow costs, favorable sales mix, and lower SG&A costs; partially offset by $4.1 million of increased trade spending, increased freight expenses, and an increase in advertising expenses.  Additionally, the October 2015 sale-leaseback transaction of two industrial properties reduced operating income by approximately $0.6 million due to a $1.0 million increase in rent, partially offset by a $0.4 million decline in depreciation compared to the prior year period.

Second-quarter fiscal 2017 Corporate and Other summary  
Corporate and Other GAAP operating costs were $30.7 million, compared to $15.9 million last year.  Corporate and Other GAAP operating costs include the $16.5 million combined impact of the following items excluded from non-GAAP results:  $16.0 million related to the impairment of the note receivable from the 2013 sale of Mimi's Café; and $0.5 million related to costs associated with strategic initiatives.  Corporate and Other non-GAAP operating costs were $14.2 million, compared to $15.9 million last year, a decline of $1.7 million.  The decline was due primarily to lower legal and professional fees, partially offset by increased incentive compensation costs and depreciation and amortization resulting from technology-related capital expenditures. 

Second-quarter fiscal 2017 net interest expense – GAAP net interest expense was $1.7 million in the second quarter, a decline of $1.2 million, compared to $2.9 million in the corresponding period last year. Second-quarter non-GAAP net interest expense excludes the impact of $1.1 million of interest accretion related to the impairment of the note receivable from the 2013 sale of Mimi's Café.  The borrowing rate on the Company's outstanding debt was 2.28 percent at the end of the second quarter, compared to 1.95 percent for the prior year period.

Second-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 a GAAP tax benefit of 179.9 percent for the quarter, compared to tax expense of 24.8 percent for the prior year period. The change in the tax rate was driven primarily by the impact of lower pretax income due to the impairment of a note receivable booked during the quarter.  Year-to-date, the Company recognized GAAP tax expense of 18.7 percent, compared to 24.6 percent for the prior year.  For non-GAAP items, the tax rate was 25.8 percent for the quarter, reflecting the Company's annual non-GAAP estimated tax rate adjusted for the impact of second-quarter discrete items.  Year-to-date, the Company's non-GAAP estimated tax rate adjusted for the impact of discrete items was 24.4 percent.

Second-quarter fiscal 2017 balance sheet highlights – The Company's cash balance and outstanding debt at the end of the quarter were $4.9 million and $361.8 million, respectively, compared to $5.4 million and $471.4 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 3.00.   

Fiscal year 2017 outlook
Chief Administrative and Chief Financial Officer Mark Hood said, "We have updated our GAAP and non-GAAP fiscal 2017 EPS guidance ranges.  We have reduced our GAAP diluted EPS guidance range to $1.54 to $1.72, from $2.00 to $2.17 previously, to reflect the impairment of the note receivable from the 2013 sale of Mimi's Café, partially offset by improved operating performance in the first half of fiscal 2017.  We have raised our non-GAAP diluted EPS guidance range to $2.15 to $2.30, from $2.05 to $2.20 previously.

"While we continue to expect full-year negative low-single digit to flat same-store sales at Bob Evans Restaurants, we have adjusted our restaurant commodity pricing outlook to negative low-single digit to flat for the year, from approximately flat previously.  As for BEF Foods, we have lowered our sow cost forecast to $42 to $45 per hundredweight, from $50 to $53 previously, to reflect expectations for the remainder of the fiscal year.  As a consequence of lower projected sow costs, we expect lower sausage pricing (resulting from increases in trade spending to reflect an increased competitive pricing environment from lower sow costs) and have lowered our BEF Foods sales outlook to $390 to $410 million, from $400 to $420 million previously.  At the corporate level, we have added GAAP tax rate guidance of 18% to 19% for fiscal 2017 as a result of the impact of the Mimi's Café note impairment on taxable income, and increased our non-GAAP tax rate guidance 50 basis points to 24% to 25% to reflect the impact of higher taxable income on our tax preference items.  We are also maintaining our focus on lowering corporate and other costs required to support our businesses."

Guidance MetricFY ‘17
Consolidated net sales$1.24 to $1.29 billion
Bob Evans Restaurants same-store salesnegative low-single digit to flat
Bob Evans Restaurants commodity pricingnegative low-single digit to flat
BEF Foods net sales$390 to $410 million
BEF Foods sow cost (per hundredweight)$42-$45
Capital expenditures$75 to $80 million
Depreciation and amortization$71 to $75 million
Net interest expense$10 to $12 million
GAAP Tax rate18% to 19%
Non-GAAP Tax rate24% to 25%
Diluted weighted-average share countapproximately 20 million shares
Remaining share repurchase authorization  $78.5 million
GAAP diluted earnings per share$1.54 to $1.72
Non-GAAP diluted earnings per share$2.15 to $2.30
  

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 second-quarter fiscal 2017 results at 8:30 a.m. (ET) on Tuesday, December 6, 2016.  The dial-in number for the conference call is (855) 468-0551, access code 7719466.  A replay will be available at (800) 585-8367, access code 7719466.

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.  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 28, 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.

BOBE-E

Source: Bob Evans Farms, Inc.

Bob Evans Farms, Inc.
Earnings Release Fact Sheet (unaudited)
Second quarter Fiscal 2017, Three months ended October 28, 2016 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 28, 2016 October 23, 2015 October 28, 2016 October 23, 2015 October 28, 2016 October 23, 2015
Operating Income (Loss) as Reported           
Bob Evans Restaurants$13,461  $13,323         
BEF Foods18,679  13,997         
Corporate and Other(30,672) (15,886)        
Operating Income1,468  11,434         
Net interest expense1,741  2,883         
Income Before Income Taxes(273) 8,551         
Provision (benefit) for income taxes(491) 2,120         
Net Income as reported218  6,431  $0.01  $0.29  $0.01  $0.29 
            
Adjustments           
Bob Evans Restaurants           
Severance/Restructuring  318         
BEF Foods           
Loss on Sale of Assets  3,606          
Corporate and Other           
Impairments16,000           
Activism, Strategic Initiatives and Other479           
 16,479           
Total adjustments           
Impairments16,000           
Severance/Restructuring  318         
Loss on Sale of Assets  3,606         
Activism, Strategic Initiatives and Other479           
 16,479  3,924         
Non-GAAP operating income  (loss)           
Bob Evans Restaurants13,461  13,641         
BEF Foods18,679  17,603         
Corporate and Other(14,193) (15,886)        
Total non-GAAP operating income17,947  15,358         
Adjustments to net interest expense1,133  (480)        
Non-GAAP net interest expense2,874  2,403         
Non-GAAP  Income Before Taxes15,073  12,955         
Adjustments to income tax provision (benefit)4,380  1,636         
Non-GAAP Provision for Income Taxes3,889  3,756         
Non-GAAP Net Income$11,184  $9,199  $0.56  $0.42  $0.56  $0.41 
            
Weighted Average Shares Outstanding    19,825  22,115  19,964  22,233 


Second quarter Fiscal 2017, Three months ended October 28, 2016 compared to the corresponding period a year ago:
   
(in thousands) Three Months Ended
  Consolidated Results Bob Evans Restaurants
  October 28, 2016 % of Sales October 23, 2015 % of Sales October 28, 2016 % of Sales October 23, 2015 % of Sales
Operating income as reported                
                 
Net Sales $315,963    $325,021    $219,805    $230,741   
Cost of sales 96,232  30.5% 102,709  31.6% 56,007  25.5% 61,725  26.8%
Operating wage and fringe benefit expenses 100,150  31.7% 104,403  32.1% 89,352  40.7% 93,460  40.5%
Other operating expenses 58,457  18.5% 56,181  17.3% 43,018  19.6% 42,984  18.6%
Selling, general and administrative expenses 25,487  8.0% 29,902  9.2% 6,965  3.1% 5,433  2.3%
Depreciation and amortization expense 17,646  5.6% 20,107  6.2% 10,479  4.8% 13,531  5.9%
Impairments 16,523  5.2% 285  0.1% 523  0.2% 285  0.1%
Total as reported 1,468  0.5% 11,434  3.5% 13,461  6.1% 13,323  5.8%
                 
Adjustments                
                 
Net Sales                
Cost of sales                
Operating wage and fringe benefit expenses                
Other operating expenses                
Selling, general and administrative expenses (479)   (3,924)       (318)  
Depreciation and amortization expense                
Impairments (16,000)              
Total Adjustments 16,479    3,924        318   
                 
Non-GAAP operating income                
                 
Net Sales 315,963    325,021    219,805    230,741   
Cost of sales 96,232  30.5% 102,709  31.6% 56,007  25.5% 61,725  26.8%
Operating wage and fringe benefit expenses 100,150  31.7% 104,403  32.1% 89,352  40.7% 93,460  40.5%
Other operating expenses 58,457  18.5% 56,181  17.3% 43,018  19.6% 42,984  18.6%
Selling, general and administrative expenses 25,008  7.9% 25,978  8.0% 6,965  3.1% 5,115  2.2%
Depreciation and amortization expense 17,646  5.5% 20,107  6.2% 10,479  4.8% 13,531  5.9%
Impairments 523  0.2% 285  0.1% 523  0.2% 285  0.1%
Total non-GAAP operating income $17,947  5.7% $15,358  4.7% $13,461  6.1% $13,641  5.9%


(in thousands) Three Months Ended
  BEF Foods Corporate and Other
  October 28, 2016 % of Sales October 23, 2015 % of Sales October 28, 2016 October 23, 2015
Operating income (loss) as reported            
             
Net Sales $96,158    $94,280    $  $ 
Cost of sales 40,225  41.8% 40,984  43.5%    
Operating wage and fringe benefit expenses 10,798  11.2% 10,943  11.6%    
Other operating expenses 15,439  16.1% 13,197  14.0%    
Selling, general and administrative expenses 6,775  7.1% 10,964  11.7% 11,747  13,505 
Depreciation and amortization expense 4,242  4.4% 4,195  4.4% 2,925  2,381 
Impairments   %   % 16,000   
Total as Reported 18,679  19.4% 13,997  14.8% (30,672) (15,886)
             
Adjustments            
             
Net Sales            
Cost of sales            
Operating wage and fringe benefit expenses            
Other operating expenses            
Selling, general and administrative expenses     (3,606)   (479)  
Depreciation and amortization expense            
Impairments         (16,000)  
Total adjustments     3,606    16,479   
             
Non-GAAP operating income (loss)            
             
Net Sales 96,158    94,280       
Cost of sales 40,225  41.8% 40,984  43.5%    
Operating wage and fringe benefit expenses 10,798  11.2% 10,943  11.6%    
Other operating expenses 15,439  16.1% 13,197  14.0%    
Selling, general and administrative expenses 6,775  7.1% 7,358  7.8% 11,268  13,505 
Depreciation and amortization expense 4,242  4.4% 4,195  4.4% 2,925  2,381 
Impairments   %   %    
Total non-GAAP operating income (loss) $18,679  19.4% $17,603  18.7% $(14,193) $(15,886)


Bob Evans Farms, Inc.
Earnings Release Fact Sheet (unaudited)
Second quarter Fiscal 2016, six months ended October 28, 2016, 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 28, 2016 October 23, 2015 October 28, 2016 October 23, 2015 October 28, 2016 October 23, 2015
Operating Income (Loss) as Reported           
Bob Evans Restaurants$25,062  $23,132         
BEF Foods34,066  29,834         
Corporate and Other(43,963) (33,270)        
Operating Income15,165  19,696         
Net interest expense3,633  5,489         
Income Before Income Taxes11,532  14,207         
Provision (benefit) for income taxes2,151  3,496         
Net Income as reported9,381  10,711  $0.47  $0.48  $0.47  $0.47 
            
Adjustments           
Bob Evans Restaurants           
Severance/Restructuring  318         
Store Closure Costs807           
Litigation Reserves(278) 10,500         
 529  10,818         
BEF Foods           
Loss on Sale of Assets  3,606         
   3,606         
Corporate and Other           
Impairments16,000           
Activism, Strategic Initiatives and Other479           
 16,479           
Total adjustments           
Impairments16,000           
Severance/Restructuring807  318         
Loss on Sale of Assets  3,606         
Activism, Strategic Initiatives and Other479           
Litigation Reserves(278) 10,500         
 17,008  14,424         
Non-GAAP operating income (loss)           
Bob Evans Restaurants25,591  33,950         
BEF Foods34,066  33,440         
Corporate and Other(27,484) (33,270)        
Total non-GAAP operating income32,173  34,120         
Adjustments to net interest expense1,133  (480)        
Non-GAAP net interest expense4,766  5,009         
Non-GAAP Income Before Taxes27,407  29,111         
Adjustments to income tax provision (benefit)4,521  4,712         
Non-GAAP Provision for Income Taxes6,672  8,208         
Non-GAAP Net Income$20,735  $20,903  $1.05  $0.93  $1.04  $0.93 
            
Weighted Average Shares Outstanding    19,807  22,421  19,982  22,572 


Second quarter Fiscal 2016, six months ended October 28, 2016, compared to the corresponding period a year ago:
  
(in thousands)Six Months Ended
 Consolidated Results Bob Evans Restaurants
 October 28, 2016 % of Sales October 23, 2015 % of Sales October 28, 2016 % of Sales October 23, 2015 % of Sales
Operating income as reported               
                
Net Sales$622,280    $646,734    $440,181    $469,410   
Cost of sales189,482  30.4% 199,030  30.8% 111,243  25.3% 123,192  26.2%
Operating wage and fringe benefit expenses200,848  32.3% 209,287  32.4% 180,866  41.1% 188,922  40.2%
Other operating expenses114,098  18.3% 107,815  16.7% 85,562  19.4% 83,001  17.7%
Selling, general and administrative expenses50,945  8.2% 70,361  10.9% 15,371  3.5% 23,868  5.1%
Depreciation and amortization expense35,219  5.7% 40,260  6.2% 21,554  4.9% 27,010  5.8%
Impairments16,523  2.7% 285  % 523  0.1% 285  0.1%
Total as reported$15,165  2.4% $19,696  3.0% $25,062  5.7% $23,132  4.9%
                
Adjustments               
                
Net Sales$        $    $   
Cost of sales               
Operating wage and fringe benefit expenses               
Other operating expenses(340)       (340)      
Selling, general and administrative expenses(668)   (14,424)   (189)   (10,818)  
Depreciation and amortization expense               
Impairments(16,000)              
Total Adjustments$17,008    $14,424    $529    $10,818   
                
Non-GAAP operating income               
                
Net Sales$622,280    $646,734    $440,181    $469,410   
Cost of sales189,482  30.4% 199,030  30.8% 111,243  25.3% 123,192  26.2%
Operating wage and fringe benefit expenses200,848  32.3% 209,287  32.4% 180,866  41.1% 188,922  40.2%
Other operating expenses113,758  18.3% 107,815  16.7% 85,221  19.4% 83,001  17.7%
Selling, general and administrative expenses50,276  8.0% 55,937  10.9% 15,182  3.4% 13,050  2.8%
Depreciation and amortization expense35,219  5.7% 40,260  6.2% 21,554  4.9% 27,010  5.8%
Impairments523  0.1% 285  % 523  0.1% 285  0.1%
Total non-GAAP operating income$32,174  5.2% $34,120  3.0% $25,592  5.8% $33,950  7.2%


(in thousands)Six Months Ended
 BEF Foods Corporate and Other
 October 28, 2016 % of Sales October 23, 2015 % of Sales October 28, 2016 October 23, 2015
Operating income (loss) as reported           
            
Net Sales$182,099    $177,324    $  $ 
Cost of sales78,239  43.0% 75,838  42.8%    
Operating wage and fringe benefit expenses19,982  11.0% 20,365  11.5%    
Other operating expenses28,537  15.7% 24,814  14.0%    
Selling, general and administrative expenses13,240  7.2% 17,880  10.1% 22,333  28,613 
Depreciation and amortization expense8,035  4.4% 8,593  4.8% 5,630  4,657 
Impairments  %   % 16,000   
Total as Reported$34,066  18.7% $29,834  16.8% $(43,963) $(33,270)
            
Adjustments           
            
Net Sales$    $    $  $ 
Cost of sales           
Operating wage and fringe benefit expenses           
Other operating expenses           
Selling, general and administrative expenses    (3,606)   (479)  
Depreciation and amortization expense           
Impairments        (16,000)  
Total adjustments$    $3,606    $16,479  $ 
            
Non-GAAP operating income (loss)           
            
Net Sales$182,099    $177,324    $  $ 
Cost of sales78,239  43.0% 75,838  42.8%    
Operating wage and fringe benefit expenses19,982  11.0% 20,365  11.5%    
Other operating expenses28,537  15.7% 24,814  14.0%    
Selling, general and administrative expenses13,240  7.2% 14,274  8.0% 21,854  28,613 
Depreciation and amortization expense8,035  4.4% 8,593  4.8% 5,630  4,657 
Impairments  %   %    
Total non-GAAP operating income (loss)$34,066  18.7% $33,440  18.9% $(27,484) $(33,270)


GAAP to Non-GAAP reconciliation of forecasted full year EPS results:
   
 GAAP Diluted EPS  Non-GAAP Diluted EPS
Year to date EPS through Q2 2017$0.47   $1.04   
Expected GAAP EPS - second half of fiscal 2017$1.07 - $1.25  $1.07 - $1.25  
Expected impact of non GAAP items - second half of fiscal 2017  $0.01 - $0.04  
Expected full year EPS - fiscal 2017$1.54 - $1.72  $2.15 - $2.30  


(in thousands, except per share amounts)Three Months Ended Six Months Ended
 October 28, 2016 % of Sales October 23, 2015 % of Sales  October 28, 2016 % of Sales October 23, 2015 % of Sales
Net Sales$315,963  $325,021   $622,280  $646,734  
Cost of sales96,232 30.5%102,709 31.6% 189,482 30.4%199,030 30.8%
Operating wage and fringe benefit expenses100,150 31.7%104,403 32.1% 200,848 32.3%209,287 32.4%
Other operating expenses58,457 18.5%56,181 17.3% 114,098 18.3%107,815 16.7%
Selling, general and administrative expenses25,487 8.0%29,902 9.2% 50,945 8.2%70,361 10.9%
Depreciation and amortization expense17,646 5.6%20,107 6.2% 35,219 5.7%40,260 6.2%
Impairments16,523 5.2%285 0.1% 16,523 2.7%285 %
Operating Income1,468 0.5%11,434 3.5% 15,165 2.4%19,696 3.0%
Net interest expense1,741  2,883   3,633  5,489  
(Loss) Income Before Income Taxes(273) 8,551   11,532  14,207  
(Benefit) Provision for income taxes(491) 2,120   2,151  3,496  
Net Income$218  $6,431   $9,381  $10,711  
Earnings Per Share — Net Income         
Basic$0.01  $0.29   $0.47  $0.48  
Diluted$0.01  $0.29   $0.47  $0.47  
          
Cash Dividends Paid Per Share$0.34  $0.31   $0.68  $0.62  
          
Weighted Average Shares Outstanding         
Basic19,825  22,115   19,807  22,421  
Dilutive shares139  118   175  151  
Diluted19,964  22,233   19,982  22,572  
          
Shares outstanding at quarter end19,766  21,379       


Consolidated Balance Sheets
    
(in thousands, except par values)October 28, 2016 April 29, 2016
Assets   
Current Assets   
Cash and equivalents$4,883  $12,896 
Accounts receivable, net39,823  28,893 
Inventories33,335  24,997 
Federal and state income taxes receivable4,309   
Prepaid expenses and other current assets8,816  9,307 
Current assets held for sale23,887  31,644 
Total Current Assets115,053  107,737 
Property, plant and equipment1,285,883  1,263,413 
Less accumulated depreciation689,722  665,777 
Net Property, Plant and Equipment596,161  597,636 
Other Assets   
Deposits and other3,826  4,622 
Notes receivable, net6,256  20,886 
Rabbi trust assets21,629  20,662 
Goodwill and other intangible assets19,751  19,829 
Non-current deferred tax assets34,905  29,002 
Total Other Assets86,367  95,001 
Total Assets$797,581  $800,374 
Liabilities and Stockholders' Equity   
Current Liabilities   
Current portion of long-term debt$3,423  $3,419 
Accounts payable41,628  37,518 
Accrued property, plant and equipment purchases5,149  5,308 
Accrued non-income taxes14,246  15,696 
Accrued wages and related liabilities19,417  26,358 
Self-insurance reserves18,429  20,169 
Deferred gift card revenue12,051  14,147 
Current taxes payable2,699  9,473 
Current reserve for uncertain tax provision1,481  1,481 
Other accrued expenses25,773  31,988 
Total Current Liabilities144,296  165,557 
Long-Term Liabilities   
Deferred compensation18,022  17,761 
Reserve for uncertain tax positions2,650  2,752 
Deferred rent and other6,313  5,851 
Long-term deferred gain54,803  56,371 
Credit facility borrowings and other long-term debt358,360  335,638 
Total Long-Term Liabilities440,148  418,373 
Stockholders' Equity   
Common stock, $.01 par value; authorized 100,000 shares; issued 42,638 shares at October 28, 2016, and April 29, 2016426  426 
Capital in excess of par value245,535  244,304 
Retained earnings827,999  832,323 
Treasury stock, 22,872 shares at October 28, 2016, and 22,881 shares at April 29, 2016, at cost(860,823) (860,609)
Total Stockholders' Equity213,137  216,444 
Total Liabilities and Stockholders' Equity$797,581  $800,374 


Consolidated Statements of Cash Flows
  
 Six Months Ended
 October 28, 2016 October 23, 2015
Operating activities:   
Net income$9,381  $10,711 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization35,218  40,260 
Impairments16,523  285 
(Gain) Loss on disposal of fixed assets(1,664) 1,603 
(Gain) Loss on rabbi trust assets(967) 2,453 
Loss (Gain) on deferred compensation1,115  (1,462)
Share-based compensation3,263  3,329 
Accretion on long-term note receivable(1,133) (1,011)
Deferred income taxes(5,903) 161 
Amortization of deferred financing costs720  1,336 
Cash provided by (used for) assets and liabilities:   
Accounts receivable(10,930) (5,597)
Inventories(8,338) (4,558)
Prepaid expenses and other current assets491  (1,136)
Accounts payable4,110  8,454 
Federal and state income taxes(11,185) 10,719 
Accrued wages and related liabilities(6,941) (7,710)
Self-insurance(1,740) 1,904 
Accrued non-income taxes(1,450) 2,072 
Deferred revenue(2,096) (1,794)
Other assets and liabilities(7,060) 6,332 
Net cash provided by operating activities11,414  66,351 
Investing activities:   
Purchase of property, plant and equipment(37,086) (26,667)
Proceeds from sale of property, plant and equipment10,688  58,451 
Deposits and other130  (566)
Net cash (used in) provided by investing activities(26,268) 31,218 
Financing activities:   
Cash dividends paid(13,452) (14,040)
Gross proceeds from credit facility borrowings and other long-term debt189,179  380,192 
Gross repayments of credit facility borrowings and other long-term debt(166,490) (356,610)
Payments of debt issuance costs  (2,517)
Purchase of treasury stock  (104,929)
Proceeds from share-based compensation  214 
Cash paid for taxes on share-based compensation(667) (1,007)
Excess tax benefits from share-based compensation(1,729) 131 
Net cash provided by (used in) financing activities6,841  (98,566)
Net decrease in cash and equivalents(8,013) (997)
Cash and equivalents at the beginning of the period12,896  6,358 
Cash and equivalents at the end of the period$4,883  $5,361 


Bob Evans Restaurants same-store sales analysis (18-month core; 521 restaurants)
    
 Fiscal 2017 Fiscal 2016
 Total Pricing / Mix Transactions Total Pricing / Mix Transactions
May (2.8)%  1.2%  (4.0)%  (0.3)%  3.9%  (4.2)%
June (6.1)%  1.2%  (7.3)%  (0.9)%  4.4%  (5.3)%
July (4.1)%  1.1%  (5.2)%  0.3%  5.8%  (5.5)%
Q1 (4.3)%  1.2%  (5.5)%  (0.3)%  4.8%  (5.0)%
            
August (2.0)%  1.1%  (3.1)%  (1.3)%  3.3%  (4.6)%
September (2.0)%  0.8%  (2.8)%  (3.8)%  2.9%  (6.6)%
October (1.4)%  1.2%  (2.6)%  (4.4)%  1.5%  (5.8)%
Q2 (1.8)%  1.0%  (2.8)%  (3.2)%  2.5%  (5.7)%
            
November       (3.2)%  2.5%  (5.6)%
December       (4.3)%  3.4%  (7.7)%
January       (3.4)%  3.1%  (6.5)%
Q3       (3.6)%  2.9%  (6.5)%
            
February       (1.1)%  0.9%  (2.0)%
March       (2.3)%  2.2%  (4.5)%
April       (4.9)%  1.4%  (6.3)%
Q4       (3.0)%  1.5%  (4.4)%
            
Fiscal Year (3.1)%  1.1%  (4.1)%  (2.5)%  2.9%  (5.4)%
                        
* Prior year data presentation reflects Company's current same-store sales methodology.


Bob Evans Restaurants same-store sales day part performance
 
Second-quarter Fiscal 2017 SSS% Day Part Performance - Total Chain
Day Part On-Premises Off-Premises Total
Breakfast  (0.7)%  6.5%  0.1%
Lunch  (1.6)%  (0.2)%  (1.5)%
Dinner  (4.4)%  (2.6)%  (4.1)%
Total  (2.1)%  0.2%  (1.8)%


Bob Evans Restaurants key restaurant sales data
  
 Bob Evans Restaurants
Average annual store sales ($) - FY17$1.7 million
  
Q2 FY2017 day part mix (%): 
Breakfast33%
Lunch36%
Dinner31%
  
Q2 FY2017 dine-in check average per guest ($): 
Breakfast$9.52 
Lunch$9.83 
Dinner$9.81 
  
Q2 FY2017 dine-in check average per guest ($):$9.72 
Q2 FY2017 dine-in check average per ticket ($):$18.78 
Q2 FY2017 carry-out check average per ticket ($):  $16.50 


BEF Foods total pounds sold, by category      
Fiscal 2017          
Category Q1 Q2 Q3 Q4 YTD
Sides  51.4%  52.5%      51.9%
Sausage  21.2%  21.9%      21.6%
Food Service - External  11.6%  10.7%      11.1%
Food Service - Intersegment  8.3%  9.0%      8.7%
Frozen  3.9%  3.4%      3.7%
Other  3.6%  2.5%      3.0%
           
Fiscal 2016          
Category Q1 Q2 Q3 Q4 FY 2016
Sides  49.6%  50.7%  50.9%  51.4%  50.7%
Sausage  22.0%  22.3%  26.6%  21.7%  23.3%
Food Service - External  14.1%  12.5%  10.4%  11.4%  11.9%
Food Service - Intersegment  6.2%  6.6%  6.0%  8.1%  6.7%
Frozen  4.6%  4.5%  3.1%  3.9%  4.0%
Other  3.5%  3.4%  3.0%  3.5%  3.4%


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