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EX-32.1 - EX-32.1 - BOB EVANS FARMS INC | l40486exv32w1.htm |
EX-31.2 - EX-31.2 - BOB EVANS FARMS INC | l40486exv31w2.htm |
EX-31.1 - EX-31.1 - BOB EVANS FARMS INC | l40486exv31w1.htm |
EX-32.2 - EX-32.2 - BOB EVANS FARMS INC | l40486exv32w2.htm |
EX-10.2 - EX-10.2 - BOB EVANS FARMS INC | l40486exv10w2.htm |
EXCEL - IDEA: XBRL DOCUMENT - BOB EVANS FARMS INC | Financial_Report.xls |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
(Mark One)
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended July 30, 2010
OR
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from
Commission file number 0-1667
Bob Evans Farms, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 31-4421866 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
3776 South High Street Columbus, Ohio 43207
(614) 491-2225
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate website, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit and post such files).
Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer or a non-accelerated filer. See definition of accelerated filer and large accelerated
filer in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).
Yes o No þ
As of August 27, 2010, the registrant had 30,393,085 common shares outstanding.
TABLE OF CONTENTS
Table of Contents
BOB EVANS FARMS, INC.
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
Dollars in thousands | ||||||||
Unaudited | ||||||||
July 30, 2010 | April 30, 2010 | |||||||
Assets |
||||||||
Current Assets |
||||||||
Cash and equivalents |
$ | 11,465 | $ | 17,803 | ||||
Accounts receivable |
24,116 | 19,857 | ||||||
Inventories |
23,731 | 25,920 | ||||||
Deferred income taxes |
11,175 | 11,175 | ||||||
Prepaid expenses |
4,608 | 2,169 | ||||||
Total Current Assets |
75,095 | 76,924 | ||||||
Property, Plant and Equipment |
1,666,804 | 1,664,639 | ||||||
Less accumulated depreciation |
717,036 | 702,665 | ||||||
Net Property, Plant and Equipment |
949,768 | 961,974 | ||||||
Other Assets |
||||||||
Deposits and other |
4,585 | 4,143 | ||||||
Long-term investments |
22,624 | 23,032 | ||||||
Goodwill |
1,567 | 1,567 | ||||||
Other intangible assets |
41,311 | 41,517 | ||||||
Total Other Assets |
70,087 | 70,259 | ||||||
$ | 1,094,950 | $ | 1,109,157 | |||||
Liabilities and Stockholders Equity |
||||||||
Current Liabilities |
||||||||
Lines of credit |
$ | 32,000 | $ | 14,000 | ||||
Current maturities of long-term debt |
13,571 | 26,905 | ||||||
Accounts payable |
31,950 | 29,322 | ||||||
Federal and state income taxes |
7,642 | 8,708 | ||||||
Accrued nonincome taxes |
19,986 | 21,085 | ||||||
Accrued wages and related liabilities |
27,447 | 39,545 | ||||||
Self-insurance |
24,280 | 24,165 | ||||||
Deferred revenue |
13,100 | 14,447 | ||||||
Other accrued expenses |
18,073 | 15,279 | ||||||
Total Current Liabilities |
188,049 | 193,456 | ||||||
Long-Term Liabilities |
||||||||
Deferred compensation |
26,013 | 26,396 | ||||||
Federal and state income taxes |
10,318 | 10,050 | ||||||
Deferred income taxes |
67,447 | 67,538 | ||||||
Deferred rent |
24,340 | 24,273 | ||||||
Long-term debt |
135,716 | 149,287 | ||||||
Total Long-Term Liabilities |
263,834 | 277,544 | ||||||
Stockholders Equity |
||||||||
Common stock, $.01 par value; authorized 100,000,000 shares;
issued 42,638,118 shares at July 30, 2010, and April 30, 2010 |
426 | 426 | ||||||
Capital in excess of par value |
179,461 | 180,476 | ||||||
Retained earnings |
795,135 | 788,049 | ||||||
Treasury stock, 12,167,334 shares at July 30, 2010, and 12,265,865 shares at April 30, 2010, at cost |
(331,955 | ) | (330,794 | ) | ||||
Total Stockholders Equity |
643,067 | 638,157 | ||||||
$ | 1,094,950 | $ | 1,109,157 | |||||
The accompanying notes are an integral part of the financial statements.
-2-
Table of Contents
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
UNAUDITED
(Dollars in thousands, except per share amounts) | ||||||||
Three Months Ended | ||||||||
July 30, 2010 | July 24, 2009 | |||||||
Net Sales |
$ | 412,566 | $ | 429,480 | ||||
Cost of sales |
122,169 | 125,494 | ||||||
Operating wage and fringe benefit expenses |
144,098 | 151,668 | ||||||
Other operating expenses |
68,374 | 69,451 | ||||||
Selling, general and administrative expenses |
35,763 | 36,745 | ||||||
Depreciation and amortization expense |
20,776 | 20,983 | ||||||
Operating Income |
21,386 | 25,139 | ||||||
Net interest expense |
2,498 | 2,740 | ||||||
Income Before Income Taxes |
18,888 | 22,399 | ||||||
Provision for income taxes |
6,339 | 6,284 | ||||||
Net Income |
$ | 12,549 | $ | 16,115 | ||||
Earnings Per Share Basic |
$ | 0.41 | $ | 0.52 | ||||
Earnings Per Share Diluted |
$ | 0.41 | $ | 0.52 | ||||
Cash Dividends Paid Per Share |
$ | 0.18 | $ | 0.16 | ||||
The accompanying notes are an integral part of the financial statements.
-3-
Table of Contents
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
UNAUDITED
(Dollars in thousands) | ||||||||
Three Months Ended | ||||||||
July 30, 2010 | July 24, 2009 | |||||||
Operating activities: |
||||||||
Net income |
$ | 12,549 | $ | 16,115 | ||||
Adjustments
to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
20,776 | 20,983 | ||||||
Loss on disposal/impairment of assets |
75 | 174 | ||||||
(Gain) loss on long-term investments |
1,750 | (1,892 | ) | |||||
Deferred compensation |
(383 | ) | 2,427 | |||||
Compensation expense attributable to stock plans |
3,188 | 3,895 | ||||||
Deferred income taxes |
(91 | ) | (33 | ) | ||||
Deferred rent |
67 | 222 | ||||||
Cash provided by (used for) current assets and
current liabilities: |
||||||||
Accounts receivable |
(4,259 | ) | 320 | |||||
Inventories |
2,189 | 4,053 | ||||||
Prepaid expenses |
(2,439 | ) | (2,375 | ) | ||||
Accounts payable |
2,628 | (9,710 | ) | |||||
Federal and state income taxes |
(966 | ) | 790 | |||||
Accrued wages and related liabilities |
(12,098 | ) | (1,147 | ) | ||||
Self-insurance |
115 | (354 | ) | |||||
Accrued nonincome taxes |
(1,099 | ) | (638 | ) | ||||
Deferred revenue |
(1,347 | ) | (1,205 | ) | ||||
Other accrued expenses |
2,794 | (245 | ) | |||||
Net cash provided by operating activities |
23,449 | 31,380 | ||||||
Investing activities: |
||||||||
Purchase of property, plant and equipment |
(9,048 | ) | (16,429 | ) | ||||
Proceeds from sale of property, plant and equipment |
609 | 331 | ||||||
Purchase of long-term investments |
(1,342 | ) | (1,305 | ) | ||||
Other |
(442 | ) | 446 | |||||
Net cash used in investing activities |
(10,223 | ) | (16,957 | ) | ||||
Financing activities: |
||||||||
Cash dividends paid |
(5,468 | ) | (4,915 | ) | ||||
Proceeds from lines of credit |
18,000 | | ||||||
Principal payments on long-term debt |
(26,905 | ) | | |||||
Purchase of treasury stock |
(4,356 | ) | | |||||
Proceeds from issuance of treasury stock |
232 | 1,747 | ||||||
Net share settlement of equity awards |
(1,070 | ) | | |||||
Excess tax benefits from stock-based compensation |
3 | 192 | ||||||
Net cash used in financing activities |
(19,564 | ) | (2,976 | ) | ||||
(Decrease) increase in cash and equivalents |
(6,338 | ) | 11,447 | |||||
Cash and equivalents at the beginning of the period |
17,803 | 30,133 | ||||||
Cash and equivalents at the end of the period |
$ | 11,465 | $ | 41,580 | ||||
The accompanying notes are an integral part of the financial statements.
-4-
Table of Contents
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
1. Unaudited Consolidated Financial Statements
The accompanying unaudited consolidated financial statements of Bob Evans Farms, Inc. (Bob
Evans) and its subsidiaries (collectively, Bob Evans and its subsidiaries are referred to as the
Company, we, us and our) are presented in accordance with the requirements of Form 10-Q
and, consequently, do not include all of the disclosures normally required by generally accepted
accounting principles or those normally made in our Form 10-K filing. In the opinion of
management, all adjustments (consisting of normal recurring adjustments) considered necessary for a
fair presentation of our financial position and results of operations have been included. The
consolidated financial statements are not necessarily indicative of the results of operations for a
full fiscal year. Except as described in this Form 10-Q, no significant changes have occurred in
the financial disclosures made in our Form 10-K for the fiscal year ended April 30, 2010 (refer to
the Form 10-K for a summary of significant accounting policies followed in the preparation of the
consolidated financial statements).
2. Earnings Per Share
Basic earnings-per-share computations are based on the weighted-average number of shares of
common stock outstanding during the period presented. Diluted earnings-per-share calculations
reflect the assumed exercise and conversion of employee stock options.
The numerator in calculating both basic and diluted earnings per share for each period was
reported net income. The denominator was based on the following weighted-average number of common
shares outstanding:
(in thousands) | ||||||||
Three Months Ended | ||||||||
July 30, 2010 | July 24, 2009 | |||||||
Basic |
30,445 | 30,841 | ||||||
Effect of dilutive stock options |
61 | 101 | ||||||
Diluted |
30,506 | 30,942 | ||||||
3. Stock-Based Compensation
We account for stock-based compensation in accordance with the Compensation-Stock Compensation
Topic of the Financial Accounting Standards Board (FASB) Accounting Standards Codification
(ASC). Accordingly, stock-based compensation is measured based on the fair value of the award on
the grant date and is recognized over the vesting period of the award on a straight-line basis.
Awards to retirement-eligible employees (as determined under the terms of the compensation plan
under which the award is granted) are subject to immediate expensing in full upon grant. Total
stock-based compensation expense of $3.2 million and $3.9 million for the first quarters of fiscal
2011 and 2010, respectively, is included in the Consolidated Statements of Income.
4. Industry Segments
Our business includes restaurant operations and the processing, distribution and sale of
food products. The revenues from these segments include both sales to unaffiliated customers
and intersegment sales, which are accounted for on a basis consistent with sales to
unaffiliated customers. Intersegment sales and other intersegment transactions have been
eliminated in the consolidated financial statements. Information on our operating segments is
summarized as follows:
-5-
Table of Contents
(in thousands) | ||||||||
Three Months Ended | ||||||||
July 30, 2010 | July 24, 2009 | |||||||
Sales |
||||||||
Restaurant operations |
$ | 343,085 | $ | 359,815 | ||||
Food products |
72,611 | 72,826 | ||||||
415,696 | 432,641 | |||||||
Intersegment sales of food products |
(3,130 | ) | (3,161 | ) | ||||
Total |
$ | 412,566 | $ | 429,480 | ||||
Operating income |
||||||||
Restaurant operations |
$ | 21,357 | $ | 20,388 | ||||
Food products |
29 | 4,751 | ||||||
Total |
$ | 21,386 | $ | 25,139 | ||||
5. Taxes
The combined federal and state income tax rates were 33.6% in the first quarter of fiscal 2011
versus 28.1% in the corresponding period a year ago.
Our effective income tax rate is evaluated each quarter. The effective income tax rate for
the quarter may or may not represent the expected annual effective tax rate for the entire fiscal
year and includes the impact of discrete items for the quarter. The prior year tax rate benefitted
from settlements with certain state taxing authorities.
6. Financial Instruments
The fair values of our financial instruments (other than long-term debt) approximate their
carrying values at July 30, 2010. At July 30, 2010, the estimated fair value of our long-term debt
approximated $162.4 million compared to a carrying amount of $149.3 million. We estimate the fair
value of our long-term debt based on the current interest rates offered for debt of the same
maturities. We do not use derivative financial instruments for speculative purposes.
7. Reclassifications
Certain prior year amounts have been reclassified to conform to the fiscal 2011
classification.
8. Subsequent Events
In August 2010, we closed our food production facility in Galva, Illinois. The decision to
close the food production facility was due to excess capacity and diminishing supply in the live
sow market. We will record a charge of approximately $2 million in the second quarter of fiscal
2011 resulting from severance and other costs related to closing the Galva food production
facility.
-6-
Table of Contents
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
General Overview
In this Managements Discussion and Analysis of Financial Condition and Results of Operations
(MD&A), we use the terms Bob Evans, Company, we, us and our to collectively refer to
Bob Evans Farms, Inc., a Delaware corporation, and its subsidiaries.
The following terms used herein are registered trademarks or service marks of Bob Evans:
Bob EvansÒ, Bob
Evans RestaurantsÒ, Bob Evans Special TouchÒ, Best Brand BuildersSM,
MimisÒ Mimis CaféÒ, OwensÒ and
Taste of the FarmÒ.
As
of July 30, 2010, we owned
and operated 714 full-service restaurants, including 569 Bob Evans Restaurants in 18 states and 145
Mimis Cafés (Mimis) in 24 states. Bob Evans Restaurants are primarily located in the Midwest,
mid-Atlantic and Southeast regions of the United States. Mimis are primarily located in
California and other western states. Revenue in the restaurant segment is recognized at the point
of sale. We also produce and distribute pork sausage products and a variety of complementary
homestyle convenience food items under the Bob Evans and Owens brand
names. These food products are distributed primarily to warehouses that distribute to grocery
stores throughout the United States. Revenue in the food products segment is recognized when
products are delivered to our customers warehouses.
The Securities and Exchange Commission (SEC) encourages companies to disclose
forward-looking information so that investors can better understand a companys future prospects
and make informed investment decisions. This MD&A and other written or oral statements that we
make from time to time may contain forward-looking statements that set forth anticipated results
based on managements plans and assumptions. Statements in this MD&A that are not historical facts
are forward-looking statements. These statements are often indicated by words such as expects,
anticipates, believes, estimates, intends and plans. 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,
including the assumptions, risks and uncertainties discussed in our Annual Report on Form 10-K for
the fiscal year ended April 30, 2010, under the heading Item 1A Risk Factors. We note these
factors for investors as contemplated by the Private Securities Litigation Reform Act of 1995. It
is impossible to predict or identify all of the risk factors that we face. Consequently, you
should not consider any such list to be a complete set of all potential assumptions, risks or
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 for circumstances or events that
occur after the date on which the statement is made. Any further disclosures we make in our
filings with the SEC should also be consulted.
The following table reflects data for our first fiscal quarter ended July 30, 2010, compared
to the prior years first fiscal quarter ended July 24, 2009. The consolidated information is
derived from the accompanying Consolidated Statements of Income. The table also includes data for
our two industry segments restaurant operations and food products. The ratios presented reflect
the underlying dollar values expressed as a percentage of the applicable net sales amount.
Consolidated Results | Restaurant Segment | Food Products Segment | ||||||||||||||||||||||
(dollars in thousands) | Q1 2011 | Q1 2010 | Q1 2011 | Q1 2010 | Q1 2011 | Q1 2010 | ||||||||||||||||||
Net sales |
$ | 412,566 | $ | 429,480 | $ | 343,085 | $ | 359,815 | $ | 69,481 | $ | 69,665 | ||||||||||||
Operating income |
$ | 21,386 | $ | 25,139 | $ | 21,357 | $ | 20,388 | $ | 29 | $ | 4,751 | ||||||||||||
Cost of sales |
29.6 | % | 29.2 | % | 24.0 | % | 24.5 | % | 57.3 | % | 53.8 | % | ||||||||||||
Operating wages |
34.9 | % | 35.3 | % | 39.4 | % | 39.7 | % | 13.2 | % | 12.9 | % | ||||||||||||
Other operating |
16.6 | % | 16.2 | % | 18.8 | % | 18.2 | % | 5.5 | % | 5.3 | % | ||||||||||||
S,G&A |
8.7 | % | 8.5 | % | 6.3 | % | 6.7 | % | 20.4 | % | 18.1 | % | ||||||||||||
Depr. & amort. |
5.0 | % | 4.9 | % | 5.3 | % | 5.2 | % | 3.6 | % | 3.1 | % | ||||||||||||
Operating income |
5.2 | % | 5.9 | % | 6.2 | % | 5.7 | % | 0.0 | % | 6.8 | % |
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Table of Contents
Restaurant Segment Overview
The ongoing industry-wide factors most relevant to our restaurant segment include: the
economy, sales trends, labor and fringe benefit expenses, commodity prices, energy prices,
competition, consumer acceptance, restaurant openings and closings, governmental initiatives, food
safety and weather. For the first quarter of fiscal 2011, the factors that had the greatest
positive impact on our restaurant segment performance were improved cost of sales, labor costs and
selling, general and administrative expenses (S,G,&A). The factor that had the greatest negative
impact was lower same-store sales at Bob Evans Restaurants and Mimis.
In the first quarter of fiscal 2011, same-store sales decreased 3.5% at Bob Evans Restaurants
and decreased 7.6% at Mimis compared to the corresponding period last year. Restaurant segment
operating income increased $1.0 million in the first quarter of fiscal 2011 compared to the
corresponding period last year. We remain focused on improving same-store sales at Bob Evans
Restaurants and Mimis in a challenging economic environment. We are also continuing our efforts
to control labor and food costs, which we believe have been effective in mitigating the impact of
negative leverage from lower same-store sales.
Food Products Segment Overview
The ongoing industry-wide factors most relevant to our food products segment include: sow
costs and other commodity costs, transportation and energy costs, governmental initiatives and
regulations, food safety and other risks such as the economy, weather and consumer acceptance. In
the first quarter of fiscal 2011, net sales decreased $0.2 million, or 0.3%, and pounds sold of
comparable products decreased 2% compared to the corresponding period last year.
Operating income in the food products segment decreased $4.7 million, or 99.4%, in the first
quarter of fiscal 2011 compared to the corresponding period last year. Sow costs represent a
significant part of the food products segments cost of sales, and the volatile nature of sow costs
greatly impacts the profitability of the segment. In the first quarter of fiscal 2011, average sow
costs increased 38% compared with the corresponding period last year. The decrease in operating
income is mainly due to the significant increase in sow costs, the decrease in comparable pounds
sold, an increase in operating wages and an increase in S,G&A. We anticipate that sow costs will
remain at historically high rates for the remainder of fiscal 2011. We increased the price of
nearly all of our retail food products in the second quarter of fiscal 2011, which we expect will
partially offset the impact of increased sow costs on our operating income.
Sales
Consolidated net sales decreased 3.9% to $412.6 million in the first quarter of fiscal 2011
compared to $429.5 million in the corresponding period last year. The decrease was comprised of
sales decreases in the restaurant segment and food products segment of $16.7 million and $0.2
million, respectively. Restaurant sales accounted for 83.2% of consolidated net sales in the first
quarter of fiscal 2011.
Restaurant sales decreased $16.7 million, or 4.6%, in the first quarter of fiscal 2011
compared to the corresponding period last year. The sales decrease in the first quarter was
primarily due to negative same-store sales at both of our restaurant concepts and the planned
phase-out of existing retail inventory at Bob Evans Restaurants. During the first quarter of
fiscal 2011, we continued to phase-out our assortment of traditional retail inventory. The
decreased assortment of items negatively impacted sales. We phased out this inventory to improve
our selection of retail items by shifting the assortment to food and other branded items
consistent with our Taste of the Farm sales layer and brand positioning.
Bob Evans Restaurants experienced a same-store sales decrease of 3.5% in the first quarter of
fiscal 2011, which included an average menu price increase of 1.9%. The phase-out of existing
retail inventory accounted for approximately 0.9 points of the same-store sales decline at Bob
Evans Restaurants. Mimis experienced a same-store sales decrease of 7.6% in the first quarter of
fiscal 2011, which included an average menu price increase of 2.6%. See
the BEST Brand Builders section for a discussion of initiatives to build sales.
-8-
Table of Contents
Same-store sales computations for a given year are based on net sales of stores that are open
for at least two years prior to the start of that year. Sales of stores to be rebuilt are excluded
for all periods in the computation when construction commences on the replacement building. Sales
of closed stores are excluded for all periods in the computation.
The following chart summarizes the restaurant openings and closings during the last five
quarters for Bob Evans Restaurants and Mimis:
Bob Evans Restaurants:
Beginning | Opened | Closed | Ending | |||||||||||||
Fiscal 2011 |
||||||||||||||||
1st quarter |
569 | | | 569 | ||||||||||||
Fiscal 2010 |
||||||||||||||||
1st quarter |
570 | | 1 | 569 | ||||||||||||
2nd quarter |
569 | | | 569 | ||||||||||||
3rd quarter |
569 | | | 569 | ||||||||||||
4th quarter |
569 | | | 569 |
Mimis:
Beginning | Opened | Closed | Ending | |||||||||||||
Fiscal 2011 |
||||||||||||||||
1st quarter |
146 | | 1 | 145 | ||||||||||||
Fiscal 2010 |
||||||||||||||||
1st quarter |
144 | | | 144 | ||||||||||||
2nd quarter |
144 | 1 | | 145 | ||||||||||||
3rd quarter |
145 | 1 | | 146 | ||||||||||||
4th quarter |
146 | | | 146 |
Consolidated Restaurants:
Beginning | Opened | Closed | Ending | |||||||||||||
Fiscal 2011 |
||||||||||||||||
1st quarter |
715 | | 1 | 714 | ||||||||||||
Fiscal 2010 |
||||||||||||||||
1st quarter |
714 | | 1 | 713 | ||||||||||||
2nd quarter |
713 | 1 | | 714 | ||||||||||||
3rd quarter |
714 | 1 | | 715 | ||||||||||||
4th quarter |
715 | | | 715 |
In the first quarter of fiscal 2011, we did not open any new Bob Evans Restaurants or Mimis.
We closed one Mimis in the first quarter of fiscal 2011 in connection with the expiration of the
restaurants lease. We expect to open three new Bob Evans Restaurants in fiscal 2011. We
also plan to rebuild 2 and remodel 30 to 35 existing Bob Evans Restaurants in fiscal 2011. In
fiscal 2011, we do not expect to open or rebuild any new Mimis restaurants. However, we expect to
remodel three to five existing Mimis restaurants. We need to improve our restaurant-level
economics at both restaurant brands to enable us to begin building restaurants again, as
development is an important part of our long-term growth strategy.
-9-
Table of Contents
The food products segment experienced a sales decrease of $0.2 million, or 0.3%, in the first
quarter of fiscal 2011 compared to the corresponding period a year ago. In the first quarter of
fiscal 2011, we experienced a 2% decrease in comparable pounds sold. Comparable pounds sold is
calculated using the same products in both periods and excludes new products. We believe the
decrease in the volume of pounds sold was due to our decision to reduce the amount of promotional
discounts on pork sausage products provided to retailers. This $3.1 million, or 26.2%
year-over-year decrease in the amount of promotional discounts partially offset the adverse impact
of the decrease in the volume of comparable pounds sold. We implemented a price increase on
nearly all of our retail products early in the second quarter of fiscal 2011 to partially offset
the negative impact of the historically high sow costs we anticipate for the remainder of fiscal
2011. We anticipate sow costs for all of fiscal 2011 to average at the high end of our guidance
range of $55 to $60 per hundredweight. We plan to continue our strategy of growing our food
products business through successful product introductions and additional points of distribution.
See the BEST Brand Builders section for a further discussion of these growth strategies.
Cost of Sales
Consolidated cost of sales (cost of materials) was 29.6% of sales in the first quarter of
fiscal 2011 compared to 29.2% in the corresponding period a year ago.
In fiscal 2011, restaurant segment cost of sales (predominantly food cost) was 24.0% of sales
in the first quarter compared to 24.5% of sales in the corresponding period last year. The
improvement in restaurant segment cost of sales as a percent of sales in fiscal 2011 was
attributable to lower costs resulting from effective supply chain management and the implementation
of an actual-versus-theoretical food cost program at Bob Evans Restaurants. See the BEST Brand
Builders section for a further discussion of our productivity initiatives.
The food products segment cost of sales ratio was 57.3% of sales in the first quarter of 2011
versus 53.8% of sales in the corresponding period a year ago. The increase in the food products
segment cost of sales ratio in the first quarter was due primarily to a 38% increase in sow costs
this quarter versus the corresponding period last year. Sow costs averaged $59.52 per
hundredweight in the first quarter of fiscal 2011 compared to $43.24 per hundredweight in the first
quarter of fiscal 2010.
Operating Wage and Fringe Benefit Expenses
Consolidated operating wage and fringe benefit expenses (operating wages) were 34.9% of
sales in the first quarter of fiscal 2011 compared to 35.3% in the corresponding period last year.
In the first quarter of fiscal 2011, the operating wage ratio decreased in the restaurant segment
and increased in the food products segment compared to the corresponding period last year.
In the restaurant segment, operating wages were 39.4% of sales in the first quarter of fiscal
2011 compared to 39.7% in the corresponding period last year. The operating wage ratio in the
first quarter decreased due to lower health insurance and workers compensation claims and lower
performance-based incentive compensation, partially offset by the negative leverage due to
same-store sales declines at both Bob Evans Restaurants and Mimis. See the BEST Brand Builders
section for a further discussion of labor management.
In the food products segment, operating wages were 13.2% of sales in the first quarter of
fiscal 2011 compared to 12.9% of sales in the corresponding period last year. The increase in the
operating wage ratio was due to additional labor hours associated with the expansion of our Sulphur
Springs, Texas, ready-to-eat manufacturing facility in the second quarter a year ago.
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Other Operating Expenses
Approximately 94% of other operating expenses occurred in the restaurant segment in the first
quarters of fiscal 2011 and fiscal 2010. The most significant components of other operating
expenses were utilities, restaurant advertising, restaurant supplies, repair and maintenance, rent,
nonincome based taxes and credit/debit card processing fees. Consolidated other operating expenses
were 16.6% of sales in the first quarter of fiscal 2011 compared to 16.2% of sales in the
corresponding period last year.
In the restaurant segment, other operating expenses were 18.8% of sales in the first quarter
of fiscal 2011 compared to 18.2% of sales in the corresponding period last year. The increase in
the other operating expense ratio was a result of deleverage due to same-store sales declines at
both Bob Evans Restaurants and Mimis, higher utilities expense and higher credit/debit card
processing fees.
In the food products segment, the other operating expenses ratio was 5.5% of sales in the
first quarter of fiscal 2011 compared to 5.3% of sales in the corresponding period last year. The
increase in the other operating expense ratio was primarily due to expanded production capacity at
our Sulphur Springs, Texas, ready-to-eat manufacturing facility in the second quarter a year ago.
Selling, General and Administrative Expenses
Consolidated S,G&A expenses were 8.7% of sales in the first quarter of fiscal 2011 compared to
8.5% in the corresponding period last year. The most significant components of S,G&A expenses are
wages and fringe benefits, food products advertising expense and food products transportation
costs.
In the restaurant segment, S,G&A expenses were 6.3% of sales in the first quarter of fiscal
2011 compared to 6.7% of sales in the corresponding period last year. The decrease in the S,G&A
ratio in the first quarter of fiscal 2011 was primarily due to a reduction in performance-based
incentive compensation, which more than offset negative leverage from a decline in same-store sales
and higher administrative salary expense.
In the food products segment, S,G&A expenses were 20.4% of sales in the first quarter of
fiscal 2011 compared to 18.1% of sales in the corresponding period last year. The increase in the
S,G&A expense ratio in the first quarter of fiscal 2011 was a result of higher transportation
costs, additional costs associated with manufacturing productivity initiatives and higher
administrative salary expense.
Interest
Net interest expense for the first quarter of fiscal 2011, compared to the corresponding
period last year, was as
follows:
Three Months Ended | ||||||||
(dollars in thousands) | July 30, 2010 | July 24, 2009 | ||||||
Gross interest expense: |
||||||||
Fixed-rate debt |
$ | 2,453 | $ | 2,587 | ||||
Variable-rate debt |
45 | 158 | ||||||
2,498 | 2,745 | |||||||
Gross interest income |
| (5 | ) | |||||
Net interest expense |
$ | 2,498 | $ | 2,740 | ||||
At July 30, 2010, our outstanding debt included $32.0 million on our variable-rate revolving
lines of credit and $149.3 million on our fixed-rate unsecured senior notes. The decrease in
interest expense was primarily the result of lower average borrowings in the first quarter of
fiscal 2011 partly offset by a $0.2 million year-over-year reduction in capitalized interest. We
reduced our total debt by $79.9 million during fiscal 2010 and by an additional $8.9 million during
the first quarter of fiscal 2011. A change in market interest rates will not impact interest
expense associated with our fixed-rate debt, but will impact our variable-rate debt. For example,
a 1% increase in the benchmark rate used
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for our revolving lines of credit would increase our annual interest expense by approximately $0.3
million assuming the $32.0 million outstanding at the end of the first quarter of fiscal 2011 was
outstanding for the entire year.
Taxes
The combined federal and state income tax rate was 33.6% in the first quarter of fiscal 2011
versus 28.1% a year ago.
The lower fiscal 2010 rate reflected the impact of favorable income tax settlements with
certain state taxing authorities last year. We anticipate the annual effective tax rate for the
entire year of fiscal 2011 to approximate 34.0%. We reevaluate the combined federal and state
income tax rates each quarter. Therefore, the current projected effective tax rate for the entire
year may change.
Liquidity and Capital Resources
Cash generated from operations and our bank lines of credit were the main sources of funds for
working capital, capital expenditures, debt repayments and share repurchases in the first quarter
of fiscal 2011. Cash and equivalents totaled $11.5 million at July 30, 2010. Our bank lines of
credit total $120.0 million, of which $12.3 million is reserved for certain standby
letters-of-credit. The remaining $107.7 million of our bank lines of credit is available for
liquidity needs, capital expansion and repurchases of Bob Evans common stock. At July 30, 2010,
$32.0 million was outstanding on these lines of credit. During
the first quarter of fiscal 2011, we repurchased 170,000 shares of our outstanding common stock at a cost of $4.4 million. Our board of
directors has authorized a share repurchase program up to $25 million for the full year in fiscal
2011.
Capital expenditures consist of purchases of land for future restaurant sites, new and rebuilt
restaurants, production plant improvements, purchases of new and replacement furniture and
equipment, and ongoing remodeling programs. Capital expenditures were $9.0 million through three
months of fiscal 2011 compared to $16.4 million in the corresponding period last year. We expect
to open three new Bob Evans Restaurants in fiscal 2011. We also plan to rebuild two and remodel 30
to 35 existing Bob Evans Restaurants in fiscal 2011. In fiscal 2011, we do not plan to open or
rebuild any new Mimis. However, we plan to remodel three to five Mimis in fiscal 2011. We
expect capital spending to approximate between $60.0 and $65.0 million for all of fiscal 2011.
Capital expenditures for fiscal 2010 were $51.3 million.
We believe that our cash flow from operations, as well as our existing bank lines of credit,
will be sufficient to fund future capital expenditures, working capital requirements, debt
repayments and share repurchases. Our board of directors approved an 11.1% increase in the quarterly cash dividend from $0.18 per share to $0.20 per share on our outstanding common stock in the second quarter of fiscal 2011.
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BEST Brand Builders
In fiscal 2011, we continue to focus on the BEST (Bob Evans Special Touch) Brand Builders.
The Brand Builders represent an overall internal approach to managing the company. The five Brand
Builders are:
| Win together as a team |
| Consistently drive sales growth |
| Improve margins with an eye on customer satisfaction |
| Be the BEST at operations execution |
| Increase returns on invested capital |
Winning together as a team means focusing on the development of our people. We recognize that tangible
assets alone are not going to transform our business. We believe that having our employees engaged
and aligned with our strategic direction is one of the keys to our success. This includes having
enough talent on the front line, as well as sufficient bench strength to ensure successful
succession planning.
Accordingly, we are currently in the process of
a company-wide
talent evaluation and succession planning program. The goal of this process is to review our personnel at all
levels, based on performance, leadership competencies and industry benchmarks. This, in turn, will
help us plan any necessary changes to our organization that result from this process. We also hope
to identify potential backfills at multiple levels and identify risks of talent exiting our
organization.
As part of our commitment to building an engaged workforce, we recently launched a
company-wide employee survey. We plan to use the knowledge we gain from this survey to evaluate our
current training and human resources programs and to ensure that our people have the necessary
skills to deliver the brand promise for each one of our businesses.
The second Brand Builder is to consistently drive sales growth. Our restaurant segment
battled top-line challenges in the first quarter, due in part to our phase-out of existing retail
inventory at Bob Evans Restaurants, which had a negative impact of nearly one point on same-store
sales at Bob Evans Restaurants in the first quarter. We expect this negative impact to reverse once
we complete the transition of our retail product assortment to the food and branded items which ar
consistent with our new Taste of the Farm retail and carryout area by the end of fiscal 2011.
The front-of-the-house Taste of the Farm retail area is designed to drive incremental
impulse purchases and features a new fresh-baked goods section, a grab-and-go section with
sandwiches and salads, and a refrigerated section featuring our food products segments
convenience items.
In addition to our new Taste of the Farm retail program, we are optimistic about some of the
new sales-building initiatives currently under way at both restaurant concepts. Bob Evans
Restaurants will begin promoting our new family-size meals, which feed a family of four for under
$20. Along with catering, which we launched last year, this comprises one of the new incremental
sales layers we are developing at Bob Evans Restaurants.
Online ordering is also now available at all Mimis.
At Bob Evans Restaurants, we are excited about two new appetizers that we have introduced in
fiscal 2011, fried mushrooms and fried green tomatoes. We will also be introducing a new chicken
pasta in fiscal 2011. We are also pleased with sales of our new loaded home fries and hash browns,
which enable customers to load their potatoes with bacon, shredded cheddar cheese, sour cream and
scallions for an additional 99 cents. Loaded hash browns and home fries have quickly become top
sellers with our consumers and now account for as much as two-thirds of all breakfast potato orders
at certain locations.
At Mimis, as part of our goal to increase beverage sales, we implemented Wine Wednesdays,
where legally permissable,
in
the first quarter of fiscal 2011, in which all bottles of wine are half price, all day. We have
also been running happy hour specials all quarter, featuring $2 off wine and cocktails and $1 off
beer from Monday through Friday between 4 and 7 p.m., and again from 9 p.m. until closing time.
Along with our new menu and Wine Wednesdays , we are excited about the results we are seeing at Mimis with our muffin
give away days in which we offer a free pack of four muffins with a purchase of a meal. This
promotion has driven daily sales in many restaurants with increases of positive 6% in some
restaurants.
In addition, we are refocusing our marketing efforts to drive sales at Mimis. Initiatives to
improve sales include online offers through our e-club, which has grown its membership from 50,000
members to more than 510,000 in about a year and a half. Online ordering is also now available at
all Mimis.
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In our food products segment, our sales focus is on increasing comparable pounds sold and
gaining additional points of distribution. We expect to gain sales with the introduction of new
products, including seasoned potato wedges, which come in two varieties original seasoning as
well as rosemary and garlic. The second new product in our foods segment is grilling patties,
which come in original bratwurst and sweet Italian sausage flavors. Bob Evans and Owens brand
products are available for purchase in grocery stores in 50 states, the District of Columbia, the
Toronto, Canada area and parts of Mexico.
The third Brand Builder is to improve margins with an eye on customer satisfaction. Both
restaurant concepts are focused on food costs and labor. We reduced labor hours by an additional 600,000 hours in the first quarter of fiscal 2011: 350,000 hours, or more than 4% , at
Bob Evans, and nearly 300,000 hours, or more than 9%, at Mimis. Our new
actual-versus-theoretical food cost program was fully implemented at our Bob Evans Restaurants in
the fourth quarter of fiscal 2010 and will be fully implemented in our Mimis stores by the end of
the second quarter of fiscal 2011. This program will help reduce waste and improve cost of sales.
Our food costs are subject to changes in the commodity markets. With our program to
consolidate our supply chain activities, we believe we have made progress in reducing food costs
compared to where they would have been otherwise. The rollout of a new point-of sale-system at Bob
Evans Restaurants was completed in fiscal 2010. We believe this new technology will help to
simplify our order entry, achieve more precise labor scheduling and allow us to compare our actual
food costs with theoretical food costs all key to improving margins at the restaurant level.
We plan to improve food costs at Mimis through menu innovation and continuing to take
advantage of our consolidated supply chain power. Another one of our primary strategies at Mimis
is to reengineer the cost structure to enable us to build brand awareness through promotion without
having a negative impact on margins. The primary focus for the entire Mimis team is driving sales
and improving profitability. Bob Evans Restaurants and Mimis keep an eye on customer satisfaction
by monitoring key measurements, such as data from Mindshare, a third party customer satisfaction
measurement tool.
In our food products segment, we implemented a price increase on nearly all products early in
the second quarter of fiscal 2011 to partially offset the negative impact of the historically high
sow costs we anticipate for the remainder of the fiscal year. We are undertaking several
efficiency and cost saving initiatives in conjunction with the price increase to combat declining
margins. In the second quarter of fiscal 2011, we closed our manufacturing facility in Galva,
Illinois, due to overcapacity in our fresh sausage processing plants. We made this decision because
we simply cannot achieve our traditional food products segment operating margins, given our current
fixed cost structure and with sow costs at historically high levels. While we have implemented a price increase, we cannot pass on the full impact of the sow-cost increase to our retailers. And
with diminishing supply in the sow market, we are unable to run our fresh sausage processing
facilities at optimal production levels. Prior to closing the Galva plant, which accounted for 20%
of our total fresh sausage processing capacity, our facilities were only running at about 50% of
our total capacity. We redistributed production from Galva to our remaining four fresh sausage
processing plants in Hillsdale, Michigan; Bidwell, Ohio; Xenia, Ohio; and Richardson, Texas, which
will help optimize our assets. We expect to record a charge of approximately $2 million in the
second quarter, resulting from severance and other costs related to the closing of our Galva
facility.
Our fourth Brand Builder is to be the BEST at operations execution. We believe a good way to
improve our execution is to decrease employee turnover, and we have made significant progress in
that area. We have reduced Bob Evans Restaurant hourly turnover from 70% in fiscal 2010 to
approximately 65% in the first quarter of fiscal 2011, which was comparable to Mimis turnover
ratio. Operations excellence also includes our commitment to build people capability and deliver
speed with hospitality. Our improvements in this area include our new actual-versus-theoretical
food cost program. By the end of the second quarter of fiscal 2011, this new system will be fully
implemented at Mimis.
In our food products segment, the operational focus will be to continue to gain process
efficiencies through manufacturing productivity initiatives. We have now overlapped our full
conversion to a warehouse distribution
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system, which replaced our old direct-store-delivery (or DSD) system. This has resulted in a
permanent lower level of costs in the food products segment.
Our fifth and final Brand Builder is to increase returns on invested capital. During fiscal
2011 at Bob Evans Restaurants, we plan to build three new restaurants, rebuild two existing
restaurants and remodel 30 to 35 restaurants. At Mimis in fiscal 2011, we do not plan to build
any new restaurants or rebuild any existing restaurants until we see improvement in existing
restaurants profitability. We plan to remodel three to five existing Mimis restaurants in fiscal
2011. We need to continue to improve our restaurant-level economics at both restaurant brands to
enable us to begin building restaurants again, as development is an important part of our long-term
plan. We are currently reevaluating our restaurant remodel program in an effort to ensure that we
are using our capital in the most cost-effective manner. Specifically, we are exploring ways to
refresh more restaurants with less capital expenditure than our previous remodel program. We
reimaged a Bob Evans prototype in Westerville, Ohio, in fiscal 2010 with a new front-of-the-house
Taste of the Farm retail area designed to drive incremental impulse purchases. The retail
reimage features a new fresh-baked goods section, a grab-and-go section with sandwiches and salads,
and a refrigerated section featuring our food products segments convenience items. In addition,
we recently reimaged two Mimis in Glendale and Chandler, Arizona, with an upscale bar presentation
in conjunction with a wider liquor selection, a bakery display case and a dedicated to-go area.
Additionally, we have added overflow seating in our waiting area, which should drive speed of
service during peak hours.
Our quarterly dividend rate for the first quarter of fiscal 2011 was $0.18 per share and was
increased to $0.20 per share for the second quarter of fiscal 2011. In May 2010, our board of
directors authorized a share repurchase program of up to $25.0 million for fiscal 2011. We
repurchased 170,000 shares at a cost of $4.4 million in the first quarter of fiscal 2011.
In summary, we remain focused on the five BEST Brand Builders and continue to implement them
with a sense of urgency.
Business Outlook
Diluted earnings per share for the quarter decreased from $0.52 in the prior year to $0.41 in
the first quarter of fiscal 2011. The decrease in diluted earnings per share is primarily a result
of negative same-store sales at both of our restaurant concepts, along with a decrease in
comparable pounds sold and historically high sow costs in our food products segment,
discussed in the General Overview section earlier.
The fiscal 2011 outlook relies on a number of assumptions. We anticipate overall net sales to
remain relatively flat in fiscal 2011 at about $1.7 billion. We expect operating income for fiscal
2011 to be in a range of $105.0 to $110.0 million. We expect Bob Evans Restaurants to experience
full-year negative same-store sales of 2.0% to flat and Mimis to experience full-year same-store
sales of negative 5.0% to negative 2.0%. We expected lower same-store sales in the first quarter,
with gradual sequential improvement in the second, third and fourth quarters due partly to menu
innovation initiatives. We expect total net sales to approximate $965.0 to $985.0 million at Bob
Evans Restaurants and $380.0 to $395.0 million at Mimis. The restaurant segment operating margins
are expected to be approximately 6.0% to 7.0% for the full fiscal 2011 year. We expect margin
pressure from increasing commodity costs, offset by the benefit of our actual-versus-theoretical
food cost program, positive mix shifts, effective supply chain management and improving operating
wages through expected labor efficiencies.
In the food products segment, we expect continued growth in pounds sold and expanded retail
distribution, with overall net sales of $330.0 to $360.0 million for the full fiscal 2011 year.
We anticipate that sow costs will average approximately $55 to $60 per hundredweight in fiscal 2011
with the full-year average at the high end of this range. We expect operating income margins in
the food products segment of approximately 4.5% to 6.0%. We expect the food products segment
operating income margin to improve during the remainder of fiscal 2011 due to the implementation of
price increases and cost savings related to manufacturing productivity initiatives.
We are projecting net interest expense of approximately $9.0 to $10.0 million for all of
fiscal 2011.
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We estimate that our effective tax rate will approximate 34.0% for all of fiscal 2011, which
is more representative of our historical average. We project weighted-average diluted shares
outstanding to be approximately 31.0 million shares for the year.
We expect capital expenditures to approximate $60.0 to $65.0 million in fiscal 2011, an
increase in our capital spending from $51.3 million in fiscal 2010. The increase is largely due to
a greater number of Bob Evans Restaurants and Mimis remodels we expect to complete in fiscal 2011.
At Bob Evans Restaurants we plan to develop three new restaurants, plan to rebuild two restaurants
and remodel 30 to 35 existing restaurants in fiscal 2011. At Mimis, we do not plan to open or
rebuild any restaurants, but plan to remodel approximately three to five existing restaurants in
fiscal 2011. Depreciation and amortization expense for fiscal 2011 should approximate $85.0 to
$87.0 million.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not currently use derivative financial instruments for speculative or hedging purposes.
We maintain our cash and cash equivalents in financial instruments with maturities of three months
or less when purchased.
At July 30, 2010, our outstanding debt included $32.0 million on our variable-rate revolving lines
of credit and $149.3 million of fixed-rate unsecured senior notes. A change in market interest
rates will not impact interest expense associated with our fixed-rate debt, but will impact our
variable-rate debt. For example, a 1.0% increase in the benchmark rate used for our revolving
lines of credit would increase our annual interest expense by $0.3 million, assuming the $32.0
million outstanding at July 30, 2010, was outstanding for the entire fiscal year.
We purchase certain commodities such as beef, pork, poultry, seafood, produce and dairy products.
These commodities are generally purchased based upon market prices established with suppliers.
These purchase arrangements may contain contractual features that fix the price paid for certain
commodities. We do not use financial instruments to hedge commodity prices because these purchase
arrangements help control the ultimate cost paid and most commodity price aberrations are generally
short-term in nature.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
With the participation of our management, including Bob Evans principal executive officer and
principal financial officer, we have evaluated the effectiveness of our disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the Exchange
Act)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that
evaluation, Bob Evans principal executive officer and principal financial officer have concluded
that:
information required to be disclosed by Bob Evans in this Quarterly Report on
Form 10-Q and other reports that Bob Evans files or submits under the Exchange Act would
be accumulated and communicated to Bob Evans management, including its principal
executive officer and principal financial officer, as appropriate to allow timely
decisions regarding required disclosure;
information required to be disclosed by Bob Evans in this Quarterly Report on
Form 10-Q and other reports that Bob Evans files or submits under the Exchange Act would
be recorded, processed, summarized and reported within the time periods specified in the
SECs rules and forms; and
Bob Evans disclosure controls and procedures are effective as of the end of the
period covered by this Quarterly Report on Form 10-Q to ensure that material information
relating to Bob Evans and its consolidated subsidiaries is made known to them,
particularly during the period in which the periodic reports of Bob Evans, including
this Quarterly Report on Form 10-Q, are being prepared.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rule
13a-15(f) under the Exchange Act) during the period covered by this Quarterly Report on Form 10-Q
that have materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
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PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. |
Like many restaurant companies and retail employers, SWH Corporation, which does business as
Mimis Café, has been faced with allegations of purported class-wide wage and hour violations in
California. The following is a brief description of the current California class action matters
pending against SWH Corporation.
On October 28, 2008, a class action complaint entitled Leonard Flores, et al. v. SWH
Corporation d/b/a Mimis Café was filed in Orange County California Superior Court. Mr. Flores was
employed as an assistant manager of Mimis Café until September 2006 and purports to represent a
class of assistant managers who are allegedly similarly situated. Mimis Café classified its
assistant managers as exempt employees until October 2009. The case involves claims that current
and former assistant managers working in California from October 2004 to October 2009 were
misclassified by Mimis Café as exempt employees. As a result, the complaint alleged that these
assistant managers were deprived of overtime pay, rest breaks and meal periods as required for
nonexempt employees under California wage and hour laws. The complaint sought injunctive relief,
equitable relief, unpaid benefits, penalties, interest and attorneys fees and costs. Although we
believe Mimis Café properly classified its assistant managers as exempt employees under California
law, we elected to resolve the Flores lawsuit through voluntary mediation. The Orange County
California Superior Court granted final approval of a settlement on June 10, 2010, and we funded
the settlement of $1,108,722 on July 14, 2010. Payment to class members was to be mailed no later
than August 18, 2010.
On October 13, 2009, a class action complaint entitled Edder Diaz and Rosolyn Gray, et al. vs.
SWH Corporation d/b/a Mimis Café was filed in Alameda County California Superior Court. In a March
2010 amended complaint, Mr. Diaz and Ms. Gray purport to represent a class of bartenders and
servers, who are allegedly similarly situated. The case involves claims that current and former
nonexempt employees working in these positions in California from July 26, 2006, to the present (1)
were not reimbursed for certain expenses incurred in connection with the discharge of their duties
and (2) were denied rest breaks and meal periods as required for nonexempt employees under
California wage and hour laws. The complaint seeks unspecified damages, penalties, interest and
attorneys fees and costs.
We believe Mimis Café has complied with the California wage and hour laws at issue in the
Diaz lawsuit. We are evaluating the results of similar proceedings in California and are consulting
with advisors with specialized expertise. An unfavorable verdict or a significant settlement could
have a material adverse effect on our financial position, cash flows and results of operations.
We are from time-to-time involved in ordinary and routine litigation, typically involving
claims from customers, employees and others related to operational issues common to the restaurant
and food manufacturing industries. In addition to the class action lawsuits described above, we
are involved with a number of pending legal proceedings incidental to our business. Management
presently believes that the ultimate outcome of these proceedings, individually or in the
aggregate, will not have a material adverse effect on our financial position, cash flows or results
of operations.
ITEM 1A. RISK FACTORS.
There have been no material changes from the risk factors disclosed in Part 1, Item 1A, of our
Annual Report on Form 10-K for the fiscal year ended April 30, 2010.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
On May 26, 2010, the Board of Directors authorized a share repurchase program of up to $25.0
million for fiscal 2011. The program authorizes Bob Evans to repurchase its outstanding common
stock in the open market or through privately negotiated transactions.
The following table provides information on Bob Evans purchases of its common stock during the
three fiscal months ended July 30, 2010:
Total Value of | Maximum Value of | |||||||||||||||
Shares Purchased | Shares that May | |||||||||||||||
as Part of Publicly | Yet be Purchased | |||||||||||||||
Total Value of | Average Price Paid | Announced Plans | Under the Plans or | |||||||||||||
Period | Shares Purchased | Per Share | or Programs | Programs | ||||||||||||
5/1/20105/28/2010 |
$ | | $ | | $ | | $ | 25,000,000 | ||||||||
5/29/20106/25/2010 |
1,357,808 | 27.16 | 1,357,808 | 23,642,192 | ||||||||||||
6/26/20107/30/10 |
2,997,602 | 24.98 | 2,997,602 | 20,644,590 | ||||||||||||
Total |
$ | 4,355,410 | $ | 25.62 | $ | 4,355,410 | $ | 20,644,590 | ||||||||
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable
ITEM 5. OTHER INFORMATION.
Not Applicable
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ITEM 6. EXHIBITS
Exhibit No. | Description | Location | ||
10.1
|
Retirement Agreement between Bob Evans Farms, Inc. and Donald Radkoski. | Incorporated by reference to Exhibit 10 to the Companys Current Report on Form 8-K filed with the Commission on July 19, 2010 (File No. 0-01667) | ||
10.2
|
Second Amendment to the Bob Evans Farms, Inc. and Affiliates Third Amended and Restated Supplemental Executive Retirement Plan dated August 24, 2010 | Filed herewith | ||
31.1
|
Rule 13a-14(a)/15d-14(a) Certification (Principal Executive Officer) | Filed herewith | ||
31.2
|
Rule 13a-14(a)/15d-14(a) Certification (Principal Financial Officer) | Filed herewith | ||
32.1
|
Section 1350 Certification (Principal Executive Officer) | Filed herewith | ||
32.2
|
Section 1350 Certification (Principal Financial Officer) | Filed herewith | ||
101.INS
|
XBRL Instance Document | * | ||
101.SCH
|
XBRL Taxonomy Extension Schema Document | * | ||
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document | * | ||
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document | * | ||
101.PRE
|
XBRL Taxonomy Presentation Linkbase Document | * | ||
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document | * |
* | In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall be deemed to be furnished and not filed herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
BOB EVANS FARMS, INC. |
||||
By: | /s/ Steven A. Davis | |||
Steven A. Davis | ||||
Chairman and Chief Executive Officer (Principal Executive Officer) |
||||
By: | /s/ Tod P. Spornhauer | |||
Tod P. Spornhauer* | ||||
Chief Financial Officer (Principal Financial Officer) |
||||
September 8, 2010
|
* | Tod P. Spornhauer has been duly authorized to sign on behalf of the Registrant as its principal financial officer. |
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INDEX TO EXHIBITS
Quarterly Report on Form 10-Q
Dated September 8, 2010
Quarterly Report on Form 10-Q
Dated September 8, 2010
Bob Evans Farms, Inc.
Exhibit No. | Description | Location | ||
10.1
|
Retirement Agreement between Bob Evans Farms, Inc. and Donald Radkoski. | Incorporated by reference to Exhibit 10 to the Companys Current Report on Form 8-K filed with the Commission on July 19, 2010 (File No. 0-01667) | ||
10.2
|
Second Amendment to the Bob Evans Farms, Inc. and Affiliates Third Amended and Restated Supplemental Executive Retirement Plan dated August 24, 2010 | Filed herewith | ||
31.1
|
Rule 13a-14(a)/15d-14(a) Certification (Principal Executive Officer) | Filed herewith | ||
31.2
|
Rule 13a-14(a)/15d-14(a) Certification (Principal Financial Officer) | Filed herewith | ||
32.1
|
Section 1350 Certification (Principal Executive Officer) | Filed herewith | ||
32.2
|
Section 1350 Certification (Principal Financial Officer) | Filed herewith | ||
101.INS
|
XBRL Instance Document | * | ||
101.SCH
|
XBRL Taxonomy Extension Schema Document | * | ||
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document | * | ||
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document | * | ||
101.PRE
|
XBRL Taxonomy Presentation Linkbase Document | * | ||
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document | * |
* | In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall be deemed to be furnished and not filed herewith. |
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