Chairman and Chief Executive Officer Steve Davis said, “Fiscal 2014 financial performance was negatively impacted by several challenges beyond the Company’s control, including unusually severe and sustained winter weather, historically high sow costs, and BEF Foods’ supplier disruption issues.However, by focusing on factors we can control, we continued transforming our businesses to remain relevant to our restaurant guests, food customers, and stockholders for years to come.
“We successfully completed several key investment programs at both Bob Evans Restaurants and BEF Foods in fiscal year 2014.As a result of the Farm Fresh Refresh remodeling program, Bob Evans Restaurants now offers guests a consistent and revitalized restaurant environment, better positioning each of our restaurants to deliver an upgraded dine-in experience, while also offering new off-premise sales layers including bakery, carryout, and catering.Fourth-quarter monthly same-store sales trends improved, becoming sequentially less negative during the period.With the benefits of remodeled restaurants, as well as our new menu initiatives, and the recently launched “Get in on Something Good!”(TM) advertising campaign, Bob Evans Restaurants expects to open up to eight new restaurants and drive same-store sales gains of 1.5 to 2.5 percent during fiscal 2015.
“We are encouraged by insights gained from the two initial Bob Evans Express locations opened during fiscal 2014.With this experience, we are moving forward with plans to license up to ten new Bob Evans Express locations in fiscal year 2015 where we expect to assess the concept’s performance in new venues, including potential sites in shopping malls, airports, corporate campuses, manufacturing facilities, college campuses, and hospitals.We are already making progress as we are currently finalizing details for two airport and two mall locations.Ultimately, we believe Bob Evans Express represents a licensing opportunity on a national scale.
“At BEF Foods, completion of a multi-year plant network optimization and vertical integration project reduced our production footprint from nine manufacturing facilities and two primary co-packers to four manufacturing facilities with supplemental co-packing arrangements for meeting high seasonal demand and production of selected products.At the four production facilities, we expect our investments in expansions, equipment upgrades, and efficiency enhancements to enable continued growth, both top- and bottom-line, as we focus on expanding points of retail distribution and increasing product authorizations at each point of retail distribution.”
Davis continued, “We remain deeply committed to generating returns for our stockholders through our balanced approach to capital allocation.Along with investing an expected $85 to $90 million of capital expenditures in our businesses during fiscal 2015, the Company is authorized to repurchase up to $100 million of shares during fiscal year 2015.As capital expenditures return to a more typical level focused on opening new restaurants, ERP implementation, smaller-scale efficiency projects, and infrastructure maintenance in fiscal 2015, both Bob Evans Restaurants and BEF Foods are focused on operational execution.Strategic priorities in fiscal 2015 include media and trade spending to drive traffic in our restaurants, and sales in the grocery store, along with menu and product innovation.
“Fiscal 2015 is the year we expect to begin reaping the rewards of the recent capital investments we have made in Bob Evans Restaurants and BEF Foods.We believe the critical investments have been completed, the strategic course has been set, and we have the programs in place to execute effectively.”
Operating profit from continuing operations in the fourth quarter of fiscal 2014 was reduced by approximately $14.0 million, or approximately $0.39 per diluted share, compared to the prior year period due to severe winter weather, higher than projected sausage material costs, and other cost impacts as detailed below.
As of the end of the quarter, the Company has realized $48.4 million of the cash tax benefit from the fiscal 2013 conversions of its restaurant operating companies. The Company expects an additional $0.7 million of cash refunds related to the conversions in fiscal year 2015.
During the fourth quarter, the Farm Fresh Refresh remodeling program was completed and resulted in 359 closed restaurant days, compared to 535 days in the corresponding period last year.
During the fourth quarter of fiscal 2014, Bob Evans Restaurants:
For the full year of fiscal 2014, net income from continuing operations was $31.0 million, or $1.16 per diluted share, compared with net income from continuing operations of $82.6 million, or $2.90 per diluted share, in the prior year which included $6.1 million of income tax benefit.Non-GAAP net income from continuing operations was $44.7 million, or $1.68 per diluted share, compared with non-GAAP net income from continuing operations of $68.1 million, or $2.39 per diluted share, in the prior year.
Operating profit in fiscal 2014 was reduced by approximately $41.6 million, or approximately $1.07 per diluted share, compared to the prior year, due to severe winter weather, higher than projected sausage material costs, and other cost impacts as detailed below.
During fiscal 2014, the Farm Fresh Refresh remodeling program was completed.For the full year, the Company experienced 1,445 closed restaurant days, compared to 1,337 days in fiscal 2013, with a relatively minor overall impact on same-store sales.
During fiscal 2014, Bob Evans Restaurants:
The Company saw continued improvement in production efficiencies at the Sulphur Springs facility during the fourth quarter.Production volume increased while costs continued to decrease.The Company expects to be operating at planned efficiencies by the peak winter holiday season of fiscal year 2015.
BEF Foods’ non-GAAP SG&A was $64.8 million.The Company classifies transportation and marketing expenses of $17.1 million and $6.4 million, respectively, in SG&A for the BEF Foods business.
“We completed significant investment programs at both Bob Evans Restaurants and BEF Foods during fiscal 2014.Over the long-term, these investments are expected to drive sustainable earnings growth.In fiscal 2015, we expect improved performance from both of our business segments.However, consumer confidence continues to be adversely impacted by ongoing macroeconomic headwinds, including health care costs and unemployment which disproportionately affects lower- and middle-income consumers.Additionally, an increasingly competitive environment and ongoing commodity cost pressures continue to challenge our business,” said Chief Financial Officer Mark Hood.
The Company expects fiscal 2015 earnings per diluted share of $1.90 to $2.20.This guidance range incorporates approximately $8 million of increased performance-based incentive compensation accrued to target levels.
At BEF Foods, fiscal 2015 performance is likewise expected to improve throughout the year due to:growth of refrigerated side dish volume due to distribution growth as well as the absence of the supplier disruption the Company experienced during the peak winter holiday season during fiscal 2014; and the absence of plant startup costs and improved plant efficiencies, partially offset by increased year-over-year sow costs.The Company expects net pricing to be better aligned with sow costs in fiscal 2015.
From a corporate perspective, 2015 guidance includes:approximately $5.5 million of costs associated with responses to an activist stockholder, and $2.0 million of costs associated with supplemental tax and internal audit staff resources, and strengthening the Company’s internal processes and controls over financial reporting.These items are expected to primarily impact the first half of the fiscal year.
This outlook is subject to a number of factors beyond the Company’s control, including the risk factors discussed in the Company’s fiscal 2014 annual report on Form 10‑K and its other subsequent filings with the Securities and Exchange Commission.
The Company will host a conference call to discuss its fourth-quarter fiscal 2014 results at 10 a.m. (ET) on Wednesday, July 9, 2014.The dial-in number is (855) 468-0551, access code 46808831. A replay will be available at (800) 585-8367, access code 46808831.
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 26, 2013, 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.
Bob Evans Farms Inc. (the “Company”), its directors and certain of its executive officers are participants in the solicitation of proxies in connection with the Company’s 2014 Annual Meeting of Stockholders. The Company has filed a preliminary proxy statement and form of WHITE proxy card with the U.S. Securities and Exchange Commission (the “SEC”) in connection with such solicitation of proxies from the Company’s stockholders. WE URGE INVESTORS TO READ THE DEFINITIVE PROXY STATEMENT (INCLUDING ANY AMENDMENTS AND SUPPLEMENTS THERETO) AND ACCOMPANYING WHITE PROXY CARD CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.