UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
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þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
April 30, 2010
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OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission file number: 0-1667
Bob Evans Farms, Inc.
(Exact name of registrant as
specified in its charter)
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Delaware
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31-4421866
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(State or other jurisdiction
of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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3776 South High Street, Columbus, Ohio
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43207
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(Address of principal executive
offices)
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(Zip Code)
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(614) 491-2225
(Registrants telephone
number, including area code)
Securities registered pursuant to Section 12(b) of the
Exchange Act:
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, $.01 par value per share
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The NASDAQ Stock Market LLC
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Securities registered pursuant to Section 12(g) of the
Exchange Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes þ No o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Exchange
Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Exchange Act 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 Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files). Yes o No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act. (Check one):
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Large
accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller reporting
company o
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(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 October 23, 2009 (the last business day of the
registrants most recently completed second fiscal
quarter), the aggregate market value of the registrants
common stock held by non-affiliates of the registrant was
$843,357,008 based on the closing sale price as reported on the
NASDAQ Stock Market.
Indicate the number of shares outstanding of each of the
registrants classes of common stock, as of the latest
practicable date:
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Class
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Outstanding at June 25, 2010
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Common Stock, $.01 par value per share
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30,605,080 shares
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DOCUMENTS INCORPORATED BY REFERENCE
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Document
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Parts Into Which Incorporated
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Portions of the registrants Proxy Statement for the Annual
Meeting of Stockholders to be held on September 13, 2010
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Part III
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TABLE OF CONTENTS
PART I
In this Annual Report on
Form 10-K,
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 Securities and Exchange Commission encourages companies to
disclose forward-looking information so that investors can
better understand a companys future prospects and make
informed investment decisions. This Annual Report on
Form 10-K
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 Annual Report on
Form 10-K,
including those contained in Managements Discussion and
Analysis of Financial Condition and Results of Operations
included in Item 7 of this Annual Report on
Form 10-K,
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 this Annual Report on
Form 10-K
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 to reflect unanticipated events. Any further
disclosures we make in our filings with the Securities and
Exchange Commission should also be consulted.
The following description of our business should be read in
conjunction with the information contained in Managements
Discussion and Analysis of Financial Condition and Results of
Operations included in Item 7 of this Annual Report on
Form 10-K
and our consolidated financial statements included in
Item 8 of this Annual Report on
Form 10-K.
Background
We are a full-service restaurant company that operates two
restaurant concepts Bob
Evans®
Restaurants and Mimis
Cafés®.
We are also a leading producer and distributor of pork sausage
and complementary homestyle convenience food items. Our business
began in 1948 when our founder, Bob Evans, began making sausage
on his southeastern Ohio farm to serve at his 12-stool diner.
Our business grew from there, and we became a publicly traded
company in 1963. Our current company was incorporated in
Delaware in 1985 as the successor to the original company, which
was incorporated in Ohio in 1957. We expanded our business by
acquiring Owens Foods, Inc. (then known as Owens Country
Sausage, Inc.) in 1987 and SWH Corporation, which does business
as Mimis
Café®,
in July 2004.
We have a 52 or 53-week fiscal year that ends on the last Friday
in April. When we refer to fiscal 2010, fiscal 2009 and fiscal
2008, we are referring to our fiscal years that ended on
April 30, 2010, April 24, 2009, and April 25,
2008, respectively. All years presented were comprised of
52 weeks, except fiscal 2010, which had 53 weeks.
2
The following table contains information regarding revenues,
operating profit and identifiable assets of our restaurant
business and food products business for each of our last three
fiscal years.
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Fiscal Year
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2010
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2009
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2008
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(Dollars in thousands)
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Sales:
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Restaurant Operations
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$
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1,411,092
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$
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1,439,090
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$
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1,445,034
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Food Products
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351,891
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349,273
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331,060
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1,762,983
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1,788,363
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1,776,094
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Intersegment Sales of Food Products
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(36,179
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(37,851
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(39,068
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Total
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$
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1,726,804
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$
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1,750,512
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$
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1,737,026
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Operating Income:
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Restaurant Operations
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$
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85,144
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$
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12,796
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$
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78,686
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Food Products
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21,270
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15,571
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28,554
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Total
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$
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106,414
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$
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28,367
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$
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107,240
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Identifiable Assets:
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Restaurant Operations
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$
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958,311
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$
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1,020,298
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$
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1,086,453
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Food Products
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116,639
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116,729
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102,367
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1,074,950
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1,137,027
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1,188,820
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General corporate assets
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34,207
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27,148
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30,398
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Total
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$
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1,109,157
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$
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1,164,175
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$
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1,219,218
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Our
Strategy
We believe our restaurant and food products businesses are
regional brands with national potential. Our vision and mission
statements embody our expectations for our companys
future. Our vision is to be the Best in Class in all
of our food businesses. We strive to accomplish this vision by
pursuing our mission building brand loyalty by
delighting customers with high-quality, delicious products
at your place or ours, while balancing the needs of
our employees, guests and investors.
We believe we can achieve our vision and mission by following a
set of principles we refer to as our
BEST®
(Bob Evans Special Touch) Brand Builders:
1. Win Together as Team Our entire team
must work together in a spirit of collaboration. We must
communicate openly and share ideas and
BEST®
practices with one another. We are committed to recognizing
outstanding performance with pay incentives.
2. Consistently Drive Sales Growth We
will bring our brand positioning to life in everything we do.
Our goal is to drive sales by consistently offering innovative,
high-quality food that our customers will crave. We will strive
to get more guests in our restaurants and buying our grocery
products through effective marketing. We will offer exceptional
customer service and suggest our great menu items at every table.
3. Improve Margins With an Eye on Customer
Satisfaction We must keep our customers
satisfied with high-quality products and service while improving
our long-term profitability. This involves using effective
systems and processes to deliver margin improvements, such as
our restaurant labor management systems. We must control our
controllables, such as food costs, yields and waste.
4. Be the
BEST®
at Operations Execution We are committed to
producing the highest-quality products and following the highest
food safety standards. We must deliver outstanding customer
service every day and fix the problems that make our customers
unhappy. We must also ensure employee satisfaction while driving
operational efficiency and productivity.
5. Increase Returns on Invested Capital
We must generate a good return on the money we spend. Each
business in the Bob Evans Farms family must earn the right to
receive funding by generating a favorable return on the money
our company invests in it. All of our employees must think and
act like owners of our business.
3
Our
Restaurant Concepts
As of April 30, 2010, we owned and operated 569 Bob Evans
Restaurants and 146 Mimis Cafés, with no franchising.
Through our two restaurant concepts, we offer our customers a
unique dining experience by serving a variety of high-quality,
reasonably priced breakfast, lunch and dinner items in
family-friendly settings.
Bob
Evans Restaurants
Our vision for Bob Evans Restaurants is to be nationally
recognized as a premier restaurant company in all markets in
which we compete. Our mission is to be our customers
favorite restaurant by giving them our BEST (Bob Evans Special
Touch)®...one
customer at a time. Bob Evans Restaurants are founded on
quality, homestyle food and friendly service. The concept is
positioned as The Home of
Homestyle®
featuring Farm Fresh
Goodness®
that brings families together. Bob Evans Restaurants feature a
wide variety of comfort foods inspired by our homestead
heritage, such as Bob Evans sausage gravy and chicken pot pie.
Breakfast entrées are served all day and feature
traditional favorites such as sausage, bacon, eggs and hotcakes,
as well as specialty offerings like crepes and stuffed French
toast. We also offer a wide variety of lunch and dinner
entrées, including a full
line-up of
Big Farm
Salads®
and signature dinner items, such as country fried steak and
slow-roasted turkey. During fiscal 2010, we added a number of
new items to our menu from our innovation pipeline, including
several varieties of Deep Dish
Pastas®
and Farm-Fresh
Wraps®.
Our expanded Fit from the
Farm®
menu offerings, such as Apple-Cranberry Spinach Salad and
Chicken, Spinach & Tomato Pasta, provide guests who
are following a 2,000 calorie daily diet with the option of
eating three balanced meals a day at Bob Evans Restaurants.
Bob Evans Restaurants feature an inviting atmosphere inspired by
our Ohio farm heritage. The atmosphere evokes images of a
classic, timeless country home. Most traditional Bob Evans
Restaurants range in size from approximately 3,600 to
6,500 square feet while our larger Bob Evans
Restaurants & General Stores are approximately
9,800 square feet, with an approximate average of
150 seats. It costs approximately $2.3 million to
build a new Bob Evans Restaurant, including the land. We are in
the process of developing and refining a new prototype Bob Evans
Restaurant, as well as a remodeling program for our existing
restaurants that is based upon the new prototype, as discussed
in more detail in Restaurant Locations and
Expansion below.
We believe our Bob Evans Restaurants draw people who want a
wholesome meal at a fair price in an alcohol-free,
family-friendly atmosphere. Our average annual store sales were
$1.7 million per Bob Evans Restaurant in fiscal 2010.
Average per-guest checks for fiscal 2010 for breakfast, lunch
and dinner were $7.76, $8.33 and $8.54, respectively, for an
average of $8.20 for all day parts. Depending on each
locations business patterns, Bob Evans Restaurants are
generally open from 6 a.m. or 7 a.m. until 9 p.m.
or 10 p.m. Sunday through Thursday, with extended closing
hours on Friday and Saturday at some locations. During fiscal
2010, breakfast, lunch and dinner accounted for 32 percent,
37 percent and 31 percent, respectively, of total Bob
Evans Restaurant revenue. Sales on Saturday and Sunday accounted
for approximately 39 percent of a typical weeks
revenue during fiscal 2010.
We aim to Consistently Drive Sales Growth by
continuing to implement strategies to build Bob Evans
Restaurants carryout sales. We have increased marketing of
our carryout offerings, including our family meals and take-home
holiday family feasts. During fiscal 2010, Bob Evans Restaurants
introduced a new catering menu offering a wide array of
breakfast, lunch and dinner items. Bob Evans Restaurants
carryout and catering business accounted for approximately eight
percent of the concepts total fiscal 2010 revenues. To
increase our carryout and catering business in fiscal 2011, we
will continue to feature carryout offerings in our marketing
efforts, especially our new Family Meal Deals. We
also plan to introduce on-line ordering for Bob Evans
Restaurants during fiscal 2011.
We offer retail gifts, food items and other novelties for sale
on a limited basis in the Corner
Cupboard®
areas located inside most of our traditional Bob Evans
Restaurants and on a much larger scale in our seven Bob Evans
Restaurants & General
Stores®.
During fiscal 2010, we continued to improve our selection of
retail products by offering more food and other branded items
consistent with our brand positioning and homestead heritage.
4
Mimis
Cafés
Mimis is a casual dining concept positioned as The
All Day Fresh
Café.®
Mimis colorful French-cottage themed buildings offer
guests a place to relax and connect while enjoying freshly
prepared meals. The concept combines elements of an upscale
casual experience with broad everyday appeal. The cuisine has a
touch of gourmet Francais, featuring breakfasts,
lunches and dinners inspired by the fresh, seasonal dishes and
effortless style of the French Countryside. The menu includes a
variety of American and ethnic cuisine categories, including:
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Café Classics featuring signature items such as
our Chicken Pot Pie and Oven Fresh Pot Roast;
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Gourmet Francais featuring French-inspired dishes
such as quiches, French Country Brie Salad and Chicken Cordon
Bleu; and
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Fresh &
Fit®
featuring items with 650 calories or less.
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We believe that Mimis high-quality food, broad menu,
exceptional service, unique atmosphere and affordable average
check make the concept attractive to a broad demographic range.
We believe that the concept is particularly appealing to women,
and we are focusing Mimis menu, atmosphere and marketing
to attract more female guests.
All Mimis offer a selection of high-quality beer and wine.
We continue to expand the selection of alcoholic beverages to
satisfy guest demand, and in turn, increase alcohol sales and
boost profit margins. During fiscal 2010, we added distilled
spirits to our beer and wine service at eight existing and two
new Mimis. We intend to include beer, wine and distilled
spirits in all new Mimis, subject to our ability to obtain
the required liquor licenses and permits. As of the end of
fiscal 2010, 90 Mimis featured expanded alcoholic beverage
service compared to 56 stores that featured only beer and wine.
Mimis restaurants are visually appealing and resemble a
French country home with dormer windows, gabled roofs, stone
walls and bright awnings. The interior of each restaurant,
inspired by Southern European bistros, incorporates a warm base
of stone floors, brick walls and rough-hewn beamed ceilings.
Each restaurant contains distinct dining environments that
provide our guests with a variety of dining atmospheres,
including a French bistro-themed room, an outdoor patio, and a
winery-themed room, which can be used for private parties. Most
Mimis restaurants range in size from 6,000 to
7,000 square feet.
The current prototype is an approximately 6,500 to
6,800 square-foot building with an approximate average of
240 seats. It costs approximately $2.8 million to
build a new Mimis, excluding the land.
Mimis average annual unit sales in fiscal 2010 were
approximately $2.9 million. Average per-guest checks for
fiscal 2010 for breakfast, lunch and dinner were $9.68, $10.23
and $12.07, respectively, for an average of $10.72 for all day
parts. Sales of alcoholic beverages accounted for approximately
4 percent of Mimis sales in fiscal 2010. Mimis
is open from 7 a.m. to 11 p.m., with breakfast being
served all day. During fiscal 2010, breakfast, lunch and dinner
accounted for approximately 22 percent, 40 percent and
38 percent, respectively, of Mimis total revenue.
Sales on Saturday and Sunday accounted for approximately
38 percent of a typical weeks revenue during fiscal
2010.
We aim to Consistently Drive Sales Growth by
continuing to implement strategies to build Mimis carryout
sales. We have increased marketing of our carryout offerings,
including our take-home holiday family feasts. During fiscal
2010, Mimis introduced on-line ordering and a new catering
menu offering a wide array of breakfast, lunch and dinner items.
Mimis carryout and catering business accounted for
approximately 4 percent of the concepts total fiscal
2010 revenues.
We own and operate SWH Custom Foods, an approximately
25,000 square-foot prep kitchen in Fullerton, California,
that prepares signature muffin mixes, dressings, sauces and
soups for Mimis and third-party restaurants. By producing
approximately 40 to 45 different items, SWH Custom Foods allows
Mimis to maintain a consistent flavor profile and
efficiently produce an extensive menu of freshly prepared,
high-quality items. We believe that our third-party services
validate the quality of SWH Custom Foods operations and
enable us to profitably drive incremental sales and utilize
excess capacity with minimal additional capital commitment.
5
Restaurant
Management
We believe that high-quality restaurant management is critical
to the success of our restaurant concepts. We must Be the
BEST at Operations Execution to keep our customers
satisfied. Our restaurant management structure varies by concept
and restaurant size.
Our restaurant segment management structure is organized to
drive top-line growth and bottom-line profitability. Each
restaurant concept has a president and chief concept officer.
The chief concept officers focus their efforts on the overall
growth and development of the concepts, with particular focus on
increasing sales, new restaurant development and concept
evolution.
We also have a president and chief restaurant operations
officer, who is responsible for building a sales, service and
people-first culture that delivers BEST in class
results. The president and chief restaurant operations officer
leads the Bob Evans Restaurant and Mimis operations teams,
and oversees restaurant development and construction in close
cooperation with the chief concept officers. The president and
chief restaurant operations officer also leads our Operations
Services group, which develops one BEST way
solutions by standardizing operations processes across both
restaurant concepts and ensuring that all new procedures and
tools are restaurant ready. The Operations Services
team also leads our BEST University program, which includes the
Operations College we launched during fiscal 2010. Operations
College is intended to bolster our people capability by
providing training on a variety of operations topics such as
situational leadership and food safety.
At Bob Evans Restaurants, we treat strangers like friends
and friends like family. Each Bob Evans Restaurant employs
approximately 50 to 90 hourly employees and is led by a
general manager and two to three assistant managers, depending
on the size, location and sales volume of the restaurant. Bob
Evans Restaurant general managers report to an area coach who
oversees approximately eight restaurants. The area coaches
report to a vice president head coach or a region
coach. Each vice president head coach is responsible
for approximately 14 area coaches, whereas each region coach is
responsible for approximately seven area coaches. Bob Evans
Restaurants are visited regularly by all levels of management to
ensure they are functioning well and adhering to the
concepts standards.
Mimis complements fine food with service that emphasizes
our high standards, core values and attention to detail. Each
Mimis employs approximately 100 to 125 hourly
employees and is led by a general manager and two to three
assistant managers, depending on the size, location and sales
volume of the restaurant. Mimis general managers report to
a market coach, who reports to a head coach, who in turn reports
to a vice president of operations. In fiscal 2010, we classified
one assistant manager as a sales manager at each Mimis
location. The sales managers are dedicated to
Consistently Driving Sales Growth by driving
sales of beverages, appetizers and desserts, as well as
promoting quarterly sales programs such as happy hours,
catering, take-home holiday feasts and gift cards.
During fiscal 2010, we Improved Margins with an Eye on
Customer Satisfaction by focusing on ways to improve labor
and food costs. We eliminated approximately three million labor
hours from the restaurant segment during fiscal 2010 (on a
52-week basis) while improving our guest satisfaction scores at
both concepts. Bob Evans Restaurants and Mimis eliminated
approximately two million and one million labor hours,
respectively, by improving labor forecasting and scheduling. We
also reduced hourly employee and management turnover at Bob
Evans Restaurants. Additionally, we deployed technological
solutions to improve efficiency, including a computerized
point-of-sale
system and an actual versus theoretical food cost program at Bob
Evans Restaurants, and a labor scheduling tool at both
restaurant concepts.
6
Restaurant
Locations and Expansion
As of April 30, 2010, Bob Evans Restaurants (including Bob
Evans Restaurants and General Stores) were located in
18 states, primarily in the Midwest, mid-Atlantic and
Southeast, and Mimis Cafés were located in
24 states, primarily in California and other western
states. The following table sets forth the number, concept and
location of our restaurants as of the end of fiscal 2010:
Restaurants
in Operation at April 30, 2010
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Bob Evans
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Mimis
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Total
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Restaurants
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Cafés
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Restaurants
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Alabama
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1
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1
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Arizona
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12
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12
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Arkansas
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2
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2
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California
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58
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58
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Colorado
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8
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8
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Delaware
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7
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7
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Florida
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49
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11
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60
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Georgia
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2
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2
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Illinois
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16
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3
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19
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Indiana
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59
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59
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Iowa
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|
|
|
|
|
|
1
|
|
|
|
1
|
|
Kansas
|
|
|
3
|
|
|
|
2
|
|
|
|
5
|
|
Kentucky
|
|
|
23
|
|
|
|
1
|
|
|
|
24
|
|
Maryland
|
|
|
28
|
|
|
|
3
|
|
|
|
31
|
|
Michigan
|
|
|
51
|
|
|
|
|
|
|
|
51
|
|
Missouri
|
|
|
24
|
|
|
|
2
|
|
|
|
26
|
|
Nebraska
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
Nevada
|
|
|
|
|
|
|
5
|
|
|
|
5
|
|
New Jersey
|
|
|
3
|
|
|
|
|
|
|
|
3
|
|
New Mexico
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
New York
|
|
|
8
|
|
|
|
|
|
|
|
8
|
|
North Carolina
|
|
|
11
|
|
|
|
5
|
|
|
|
16
|
|
Ohio
|
|
|
194
|
|
|
|
3
|
|
|
|
197
|
|
Oklahoma
|
|
|
|
|
|
|
2
|
|
|
|
2
|
|
Pennsylvania
|
|
|
39
|
|
|
|
|
|
|
|
39
|
|
South Carolina
|
|
|
4
|
|
|
|
1
|
|
|
|
5
|
|
Tennessee
|
|
|
3
|
|
|
|
3
|
|
|
|
6
|
|
Texas
|
|
|
|
|
|
|
11
|
|
|
|
11
|
|
Utah
|
|
|
|
|
|
|
4
|
|
|
|
4
|
|
Virginia
|
|
|
17
|
|
|
|
4
|
|
|
|
21
|
|
West Virginia
|
|
|
30
|
|
|
|
|
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
569
|
|
|
|
146
|
|
|
|
715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We strive to continuously Increase Returns on Invested
Capital. Each business segment must earn the right to
receive additional capital. We believe that we have to expand
our restaurants with a focus on the quality, not just the
quantity, of openings. Future restaurant growth depends on a
variety of factors, including:
|
|
|
|
|
the expected rate of return on the money invested in the new
restaurant;
|
|
|
|
the availability of affordable sites that meet our demographic
and other specifications;
|
|
|
|
general economic conditions, including consumer spending for
family and casual dining;
|
|
|
|
growth trends in consumer demand for our restaurant concepts;
|
|
|
|
our ability to obtain local permits; and
|
|
|
|
the availability of high-quality management and hourly employees.
|
7
We use a site selection process for each restaurant concept that
includes a detailed evaluation of factors such as population
density, household income in the area, competition, the
sites visibility and traffic patterns, accessibility and
proximity to retail centers and the demographics of potential
customers.
We have slowed the expansion of Bob Evans Restaurants
dramatically over the past few years. In fiscal 2010, we did not
open any new Bob Evans Restaurants, compared to one in fiscal
2009 and two in fiscal 2008. We expect to build three new Bob
Evans Restaurants during fiscal 2011, and we also plan to
rebuild two existing Bob Evans Restaurants. We plan to locate
the three new Bob Evans Restaurants in high-traffic retail areas
or near major interstate highways located in existing markets to
deepen the concepts penetration in successful trade areas.
We do not intend to substantially increase the construction of
new Bob Evans Restaurants until we improve restaurant
level economics by increasing our sales, lowering our
labor, purchasing and construction costs, and increasing our
margins and profitability.
We locate Mimis in convenient, high-traffic areas in new
and existing regional markets that we believe will support the
concept. The casual dining segment has been hit particularly
hard by the economic recession, and we have significantly
reduced our development plans for Mimis. During fiscal
2010, we opened two new Mimis, compared to 12 in fiscal
2009 and 17 in fiscal 2008. The reduction in development is
largely due to challenging economic conditions,
sub-prime
mortgage issues, lower home values and increasing unemployment
rates, especially in regions of the country such as California,
Florida, Arizona and Nevada, which account for approximately
70 percent of Mimis sales. In light of these economic
factors and Mimis continued negative same-stores sales, we
do not believe that our average new store volumes generate a
level of return on our development costs that justifies
significant expansion of Mimis. We do not intend to
substantially increase the construction of new Mimis until
the economy improves and we are able to improve restaurant
level economics by increasing our sales, lowering our
labor, purchasing and construction costs, and increasing our
margins and profitability. As a result, we do not expect to open
any new Mimis in fiscal 2011.
We continually assess all of our existing restaurants under a
program to determine whether any restaurants should be
(1) rebuilt, (2) relocated, (3) remodeled or
(4) retired. During fiscal 2010, we retired one
underperforming Bob Evans Restaurant. We closed a Mimis
for the first time during the first quarter of fiscal 2011 by
not renewing an expiring lease. We believe these closures
strengthened our restaurant portfolio by improving overall
returns and freeing up resources for other uses.
We believe that we must invest capital in our existing
restaurants to ensure that they are safe, well-maintained and
appealing to our guests in order to increase customer
satisfaction and same-store sales. We select restaurants and
determine the level of investment based upon the return on the
investment we expect to generate through increases in sales and
profitability. We have established hurdles for the
expected rate of return on invested capital which must be met
before a restaurant is remodeled or rebuilt. A
rebuild occurs when we replace an existing
restaurant by constructing a new restaurant at the same site or
a nearby site. Remodels range from minor décor updates in
existing restaurants to more substantial changes to décor,
fixtures, equipment, layout and external appearance.
We believe we must innovate and change the way people think
about Bob Evans Restaurants by ensuring that the concept is
relevant to our family-first growth target. During fiscal 2010,
we rebuilt two Bob Evans Restaurants. The rebuilt Bob Evans
Restaurant in Xenia, Ohio is based upon a new prototype that
reflects a contemporary twist on the imagery and feel of the
original Bob Evans family farm in Rio Grande, Ohio. It features
a new color palette, flat screen televisions, free wireless
Internet access, an eat-in kitchen, a variety of
flexible dining spaces, and a large farmhouse table which serves
as a gathering spot for families and friends.
We remodeled 15 Bob Evans Restaurants during fiscal 2010. The
remodeled Bob Evans Restaurant in Westerville, Ohio features the
interior design elements of the Xenia, Ohio prototype, as well
as a new Taste of the
Farm®
retail and carryout area. We developed Taste of the
Farm®
to reenergize growth through new sales layers that elevate the
brand experience. Taste of the
Farm®
includes:
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|
|
|
|
an expanded carryout area to make purchasing carryout meals
quick and easy;
|
|
|
|
a bakery featuring Bob Evans Restaurants signature breads
and new freshly baked menu items, such as cookies and seasonal
muffins;
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8
|
|
|
|
|
a grab and go section offering a variety of
entrées such as Big Farm Salads and Farm Fresh Wraps, as
well as side items such as fruit and yogurt parfaits;
|
|
|
|
a selection of our Bob
Evans®
brand retail food products; and
|
|
|
|
a newly designed retail area featuring delicious farm flavors,
including Taste of the
Farm®
fruit preserves and baking mixes.
|
We believe the prototype-inspired design and Taste of the
Farm®
elements of the Westerville, Ohio Bob Evans Restaurant improve
the guest experience and the appeal of the Bob Evans Restaurant
brand. Based upon the sales performance of this project, we
expect to remodel or rebuild the majority of our existing Bob
Evans Restaurants within the next five years to varying degrees
in order to include Taste of the
Farm®
and to reflect certain design elements of the Xenia and
Westerville, Ohio restaurants. As part of this plan, we expect
to remodel 40 to 50 and to rebuild two existing Bob Evans
Restaurants during fiscal 2011. This will include remodeling
existing Bob Evans Restaurants in a single geographic market,
which will allow us to develop a model market to
efficiently market the revised presentation of the Bob Evans
Restaurant concept and test its performance.
During fiscal 2010, we remodeled four Mimis, three located
in southern Arizona and one in southern California. The
remodeled locations in Arizona featured a remodel package aimed
to revitalize and reposition the concept to create a distinct,
niche market focused on attracting Generation X
female guests (i.e., born between 1961 to 1981). The remodel
package includes:
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|
|
|
|
an enhanced bar area with expanded alcohol service;
|
|
|
|
a new color palette and updated décor inspired by French
bistros and the concepts positioning as the All Day Fresh
Cafe®;
|
|
|
|
a dedicated carryout area to drive off-premise sales; and
|
|
|
|
a bakery featuring Mimis signature muffins and other
freshly-baked pastries and desserts.
|
We expect to remodel approximately ten Mimis in fiscal
2011, depending upon the performance and profitability of the
new remodel package. This will include existing Mimis
located in a single geographic market, which will allow us to
develop a model market to efficiently market the
revised presentation of the Mimis concept and test its
performance.
Supply
Chain and Distribution
Controlling our supply costs is a key strategy for
Improving Margins with an Eye on Customer
Satisfaction. Our ability to offer high-quality,
reasonably priced menu items at our restaurants depends upon
acquiring food products and related items from reliable sources
at competitive prices. Our supply chain team sources, negotiates
and purchases food and non-food items from more than 700
suppliers. Our suppliers must adhere to strict product
specifications and quality control standards.
Our restaurant operating margins are subject to changes in the
price and availability of food commodities. Prices for many of
the food and other commodities we buy for our restaurants
fluctuated significantly during fiscal 2010. Our operating
margins are also affected by changes in the price of utilities,
such as natural gas upon which many of our restaurants depend
for their energy supply.
To help control costs and obtain competitive prices, our supply
chain team negotiates directly with our suppliers and
occasionally uses purchase commitment contracts to stabilize the
potentially volatile pricing associated with certain commodity
items. Additionally, we purchase products in bulk for our food
products operations and negotiate volume discounts with
suppliers. We continue to consolidate our purchasing activities
for the entire company. This allows us to leverage the combined
purchasing power of both restaurant concepts and our food
products division. As part of this effort, we use competitive
bidding and reverse on-line auctions for certain products and
services.
Our Food Products Division manufactures sausage products for
both of our restaurant concepts, which are distributed to our
restaurants by third parties. Third parties distribute food and
inventory items to our Bob Evans Restaurants once or twice a
week. Our distributors purchase products from the suppliers we
specify, at the prices we
9
negotiate, and distribute them to our Bob Evans Restaurants on a
cost-plus basis. During fiscal 2010 Bob Evans Restaurants
received supplies from one of two primary distributors,
Mattingly Foods, Inc. and Gordon Food Service, Inc.
SWH Custom Foods (Mimis in-house prep kitchen) prepares
muffin mixes, dressings, sauces and soups for all Mimis.
These items and other products are distributed to Mimis by
third parties approximately twice per week. Produce, breads and
dairy items are generally delivered to each Mimis four to
five times per week to ensure freshness. During fiscal 2010,
Mimis received supplies from PFG Customized Distribution,
a national food distributor.
Although a limited number of distributors furnish inventory
items to our restaurants, we believe other distributors can
readily provide this inventory. We have not experienced any
material or continued shortage of the products distributed by
any third parties.
During fiscal 2010, we collected bids for distribution to our
entire restaurant system and awarded contracts to Gordon Food
Service, Inc. and Meadowbrook Meat Company, Inc. We expect this
arrangement to result in improved distribution efficiency,
consistent pricing for both restaurant concepts, and lower costs
as we leverage the combined volume of Bob Evans Restaurants and
Mimis.
Sources
and Availability of Raw Materials
Menu mix in the restaurant business is varied enough that raw
materials historically have been readily available. However,
some food products may be in short supply during certain seasons
and raw material prices often fluctuate according to
availability. We believe that all essential food products will
continue to be available from our existing suppliers or, upon
short notice, can be obtained from other qualified suppliers.
Due to the rapid turnover of perishable food items, our
restaurants maintain inventories with a modest aggregate dollar
value in relation to revenues.
Advertising
and Marketing
We spent approximately $31 million on restaurant
advertising and marketing during fiscal 2010. Most of our
advertising budget was spent on television, radio, print and
outdoor advertising for Bob Evans Restaurants. We focus our
advertisements on new Bob Evans Restaurant menu items and the
concepts position as Home of
Homestyle®
and our focus on offering Farm Fresh
Goodness®
that brings families together. Our fiscal 2010 advertising
campaigns featured new menu offerings from our innovation
pipeline. We also remained focused on our digital marketing
efforts by utilizing
BE-Mail®,
Facebook and Twitter, as well as the Bob Evans Web site. We also
distribute coupons and support in-store merchandising, menus,
kids marketing programs, and local store marketing. For
example, we support the openings of new and rebuilt stores with
a special Rise and Shine grand opening celebration
attended by members of our Bob Evans Restaurant leadership team.
Traditionally, Mimis relied on
word-of-mouth
and local store marketing rather than traditional advertising
media. During fiscal 2010, we significantly expanded Mimis
marketing efforts. These new marketing efforts included in-store
merchandising, bounce-back coupons, targeted mailings and
digital media, such as the expansion of the Mimis
Café
E-Club,
targeted cable television commercials on a regional basis and
the relaunch of the Mimis Café Web site. In fiscal
2011, Mimis will focus its advertising efforts on digital
media.
Research
and Development
Research and development expenses for our restaurant operations
have not been material. As part of our effort to
Consistently Drive Sales Growth, we continuously
test food items to identify new and improved menu offerings to
appeal to our existing customers, satisfy changing eating trends
and attract new customers. We maintain
18-month
product development pipelines for both of our restaurant
concepts. These pipelines are focused on creating and
introducing innovative items, as well as enhancements to
existing offerings.
In order to keep our menus fresh and appealing to our
guests taste preferences, our product development is
concentrated on creating appealing menu offerings that are
consistent with the positioning of each brand, as well as
quality enhancements to some of our best-selling items. Product
development for Bob Evans Restaurants focuses on homestyle
offerings with a unique Bob Evans twist, whereas Mimis
develops products made with freshly prepared items consistent
with its positioning as the All Day Fresh
Café®.
10
Competition
The restaurant industry is highly competitive. There are many
different segments within the restaurant industry,
distinguishable based on the type of food, food quality,
service, location, associated
price-to-value
relationship and overall dining experience. We have positioned
our Bob Evans Restaurants in the family dining segment and our
Mimis in the casual dining segment. We must Be the
BEST at Operations Execution to effectively compete for
customers share of stomach.
The restaurant business is affected by changes in the
publics eating habits and preferences, population trends,
traffic patterns, weather conditions and gasoline and other
energy costs, as well as by local and national economic
conditions affecting consumer spending habits, many of which are
beyond our control. Key competitive factors in the industry
include the quality and value of menu offerings, quality and
speed of service, attractiveness of facilities, advertising,
name-brand awareness and image, and restaurant locations.
Although we believe our restaurant concepts compete favorably
with respect to each of these factors, many of our competitors
are well-established national, regional or local chains, and
some have substantially greater financial, marketing and other
resources than we have. Additionally, we compete with many
restaurant operators and other retail establishments for site
locations and restaurant employees. We also face growing
competition from quick-service and fast-casual restaurants that
are improving the quality and expanding the variety of their
offerings, especially at breakfast.
Food
Products Operations
Our vision for our food products business is to be a BEST in
class food business with a portfolio of convenient meal
solutions that meet consumer needs driven by innovation and
strong retail partnerships. We offer a wide variety of quality,
homestyle food products to retail and foodservice customers. We
sell our retail food products under the Bob
Evans®
and
Owens®
brand names. We believe our food products provide convenient
meal solutions that uphold our high-quality standards and unique
farm-fresh taste. Our food products include approximately 100
varieties of fresh, smoked and fully cooked pork sausage and
hickory-smoked bacon products. We also offer approximately 100
complementary, convenience food items in the refrigerated and
frozen areas of grocery stores such as mashed potatoes, macaroni
and cheese, microwaveable sandwiches and slow-roasted main dish
entrées.
During fiscal 2010, we refined our product innovation pipeline
for foodservice products and introduced approximately 30 new
retail food products, including an assortment of Bob Evans
Wrappers®
(sausage wrapped in dough) and Bob Evans
Stuffers®
(biscuits stuffed with a variety of fillings). Pounds sold from
comparable products were up seven percent, with overall food
products net sales up 1.4 percent, in fiscal 2010 compared
to fiscal 2009. Our refrigerated mashed potatoes and macaroni
and cheese side dishes continue to grow as a percentage of our
food products volume. We will continue to Consistently
Drive Sales Growth through new product development and
enhancing existing items to address changing consumer demands.
Production
We produce food products in our seven manufacturing facilities.
We produce fresh sausage products at our plants located in
Galva, Illinois, Hillsdale, Michigan, Richardson, Texas and
Xenia, Ohio. Our Bidwell, Ohio plant produces both fresh and
fully cooked sausage products. Our Sulphur Springs, Texas and
Springfield, Ohio plants produce
ready-to-eat
products, such as sandwiches, soups and gravies. We also operate
a distribution center in Springfield, Ohio.
We have made efforts to Increase Returns on Invested
Capital by implementing a plant rationalization program to
ensure we are positioned for future growth. The program is
geared to identify operational gaps and opportunities to improve
production efficiencies. As part of this program, we completed
an expansion of our Springfield, Ohio distribution center in
fiscal 2008 at a cost of approximately $9 million. During
fiscal 2010, we completed an approximately $16 million
expansion of our Sulphur Springs, Texas facility to add more
capacity to produce fully cooked products. We also
Increased Returns on Invested Capital in fiscal 2010
by continuing to improve boneless meat yields at our fresh
sausage manufacturing plants. During fiscal 2011, we plan to
reduce our production costs though the implementation of process
improvements at our manufacturing plants.
11
We strive to Be the BEST at Operations Execution by
always focusing on food safety. We follow a Hazard Analysis and
Critical Control Points (HACCP) program at each of
our manufacturing plants. HACCP is a comprehensive system
developed in conjunction with government agencies to prevent
food safety problems by addressing physical, chemical and
biological hazards. We use HACCP to identify potential safety
hazards so that key actions can be taken to reduce or eliminate
risks during production. We also have a team dedicated to food
safety and quality assurance. During fiscal 2010, all of our
manufacturing plants and our Springfield, Ohio, distribution
center earned certification through the British Retail
Consortium (BRC) Global Standard for Food Safety.
We use third parties to manufacture or co-pack all
of the Bob
Evans®
and
Owens®
products that are not produced in our own facilities. These
co-packed items include our mashed potatoes, macaroni and
cheese, and some meat items. At the end of fiscal 2010, we used
approximately 26 third parties to manufacture food products for
us.
Sales
The U.S. food industry has experienced significant
consolidation over the last 20 years as competitors have
shed non-core businesses and made strategic acquisitions to
complement category positions, maximize economies of scale in
raw material sourcing and production, and expand retail
distribution. The importance of sustaining strong relationships
with retailers has become a critical success factor for food
companies because it drives category management and continuous
replenishment programs. Food companies with category leadership
positions and strong retail relationships have increasingly
benefited from these initiatives as a way to maintain shelf
space and maximize distribution efficiencies.
Although our Bob
Evans®
brand mashed potatoes are only available on a limited basis in
some parts of the country, we believe it is the leading brand of
refrigerated mashed potatoes in the United States. Our goal is
to Consistently Drive Sales Growth by leveraging our
strong share position to secure additional retail store business
and gain more market penetration. We also believe strong brand
awareness is critical in maintaining and securing valuable
retail shelf space and will provide a strong platform for
introducing product line extensions and new products.
Before the elimination of intercompany sales to our restaurants,
retail sales accounted for approximately 88 percent of our
fiscal 2010 food products business, with foodservice sales
comprising approximately 9 percent and sales to our
restaurants comprising approximately 3 percent. Our sales
force, which consists of our national account teams and third
party food brokers, sells our food products to a number of
leading national and regional retail chains. A relatively small
number of customers accounts for a large percentage of our
sales. For fiscal 2010, our largest 10 accounts represented
approximately 60 percent of our total food products sales,
with Wal-Mart Stores, Inc. (and its affiliates) and The Kroger
Co. each accounting for over 10 percent of our food
products segment sales. As part of our effort to Win
Together as a Team, we maintain national account teams to
address the needs of our key retailers on a long-term basis.
We continue to devote time and effort on sales of our products
to foodservice customers. Items for our foodservice customers
are made to their specifications and include sausage, sausage
gravy and breakfast sandwiches. Although foodservice represents
only a small portion of our food products sales, it provides us
with incremental volume in our production plants, as well as an
opportunity for future growth.
We sell a variety of products to food brokers who in turn supply
the U.S. military, including convenience food items and
sausage. Products sold to the military represented less than one
percent of our food products volume in fiscal 2010.
In fiscal 2010, we sold our grilling sausage, side dish and
frozen breakfast items in the Ontario, Canada area. Less than
one percent of our fiscal 2010 revenue is attributable to sales
of our food products in Canada or Mexico.
Distribution
We currently supply our customers by shipping products directly
to their warehouses for further distribution by the customers to
their retail stores. In the past, we supplied customers through
our direct-store delivery system, in which members of our
route-sales team periodically called on retail stores to
purchase products off a delivery truck.
12
During fiscal 2010, we completed the conversion of our
direct-store-delivery system to a warehouse system. Although the
conversion to a warehouse system initially resulted in some
severance costs and higher slotting fees, we expect it will
provide a lower cost structure in the long-term. We also
distribute our products through food wholesalers and
distributors who primarily service smaller, independent grocers.
At the end of fiscal 2010, Bob
Evans®
and
Owens®
brand products were available for purchase in grocery stores in
all 50 states, the District of Columbia, and the Ontario,
Canada area. Our
Owens®
brand products were available for purchase primarily in Oklahoma
and Texas. Several of our
Owens®
brand products were also available in parts of Mexico through
H.E. Butt Grocery Company (dba HEB Grocery Stores).
We continue to work with retailers in states where there is an
opportunity to distribute our products. We will explore
expansion prospects with retailers to profitably increase points
of distribution. During fiscal 2010, we added approximately 700
new product authorizations (i.e., orders from customers for
products they have not ordered from us before).
Sources
and Availability of Raw Materials
The most important raw material used in our food products
business is live sows, which we depend upon to produce our pork
sausage products. We procure live sows at prevailing market
prices from terminals, local auctions, country markets and
corporate and family farms in many states and Canada. The live
sow market is highly cyclical in terms of the number of sows
available and the current market price. During fiscal 2010,
there was a significant contraction in the live sow market, and
we believe that the sow herd is at its lowest level since the
early 1900s. The live sow market is also dependent upon
supply and demand for pork products, as well as corn and soybean
meal prices (the major food supply for sows), weather and
farmers access to capital. In fiscal 2011, we believe our
food products segment will continue to be challenged by sow
costs that are significantly higher than historical averages, as
well as limited supplies of sows. To date, we have not
experienced any significant or prolonged difficulty in procuring
live sows. We have not traditionally contracted in advance for
the purchase of live sows, although we have done so in limited
quantities from
time-to-time.
We have in the past year however entered into some contracts
with regard to the purchase of live sows where we have agreed to
accept a specific number of truck loads per week with pricing
based on the current market price plus yield premiums.
Other important raw materials used in our food products
operations are seasonings and packaging materials. Historically,
these materials have been readily available, although some items
may be in short supply during certain seasons and prices
fluctuate according to availability. Generally, we purchase
these items under supply contracts, and we occasionally engage
in forward buying when we believe it to be advantageous. We
believe that these items will continue to be available from our
existing suppliers or, upon short notice, can be obtained from
other qualified suppliers.
Most of our food products are highly perishable and require
proper refrigeration. Product shelf life ranges from 18 to
60 days for refrigerated products. Due to the highly
perishable nature and shelf life of these items, our production
plants normally process only enough product to fill existing
orders. As a result, we maintain minimal inventory levels. With
our transition to a warehouse delivery system, many of our
breakfast and dinner sausage items are frozen and shipped to
warehouses. Shipping frozen product allows our retailers added
flexibility to slack out product to meet consumer demand and
allows us to build inventory for heavy consumption periods.
Advertising
and Marketing
During fiscal 2010, we spent approximately $9.5 million
marketing our food products. Our food products marketing
programs consist of advertising, consumer promotions and trade
promotions. Our advertising activities include television,
radio, newspaper and magazine advertisements aimed at increasing
brand awareness and building consumer loyalty. Consumer
promotions include the distribution of recipes featuring our
products and targeted coupons designed to attract new customers
and increase the frequency of purchases. Our trade promotions
are aimed at providing retail display support and securing
additional shelf space. During fiscal 2010, we continued to
Win Together as a Team and Consistently Drive
Sales Growth through joint marketing programs to support
both Bob Evans Restaurants and Bob Evans Food Products.
13
Competition
The food products business is highly competitive and is affected
by changes in the publics eating habits and preferences,
as well as by local and national economic conditions affecting
consumer spending habits, many of which are beyond our control.
Key competitive factors in the industry are the quality, flavor
and value of the food products offered, advertising and name
brand awareness. We believe that we compete favorably with
respect to each of these factors. Our competitors include
well-established national, regional and local producers and
wholesalers of similar products, some of whom have substantially
greater financial, marketing and other resources than we have.
We also face growing competition from private label sausage
products and side dishes. With respect to our sausage products,
our major competitors include the sausage products of
Johnsonville Sausage LLC and the Sarah Lee Corporation (i.e.,
Jimmy Dean brand). We believe that sales of our sausage and
mashed potato products constitute a significant portion of sales
of comparable products in the majority of our core markets.
Productivity
Project BEST Way
We maintain and support a company-wide productivity initiative
called Project BEST Way. The objective of Project BEST Way is to
achieve efficiencies and productivity in all business units
through various initiatives and projects. A number of projects
fall within the umbrella of Project BEST Way, including our
efforts to control and reduce supply chain costs, reducing
restaurant labor costs, and our manufacturing plant process
improvement project (i.e., LEAN manufacturing). We believe
Project BEST Way supports our annual and five-year strategic
plans by leveraging operational productivity with capital
allocation to add profit to our bottom line.
Seasonality
and Quarterly Results
Our restaurant and food products businesses are subject to
seasonal fluctuations. Historically, our highest levels of
revenue and net income at Bob Evans Restaurants occurred in the
first and second quarters of our fiscal year. Many Bob Evans
Restaurants are located near major interstate highways and
generally experience increased revenue during the summer travel
season. Conversely, Mimis business traditionally tends to
be slightly lower in the summer months. Holidays, severe weather
conditions (such as snow storms, hurricanes, thunderstorms),
natural disasters (such as flooding, tornadoes, and earthquakes)
and similar conditions may impact restaurant sales volumes in
some of the markets in which we operate.
Our food products business is seasonal to the extent that third
and fourth quarter sales are typically higher due to increased
sales of sausage during the colder months from November through
April. We promote our bratwurst and Italian sausage products for
outdoor grilling in an attempt to grow volume during the summer
months.
Our consolidated quarterly results are significantly impacted by
the cost and availability of raw materials, especially live
sows. Our consolidated quarterly results are also impacted by
the timing of new restaurant openings and remodels and their
associated costs. As a result of these and other factors, our
financial results for any given quarter may not be indicative of
the results that may be achieved for a full fiscal year.
Trademarks
and Service Marks
We have registered trademarks and service marks, including the
marks Bob
Evans®
and Mimis
Cafe®
for our restaurant business, Bob
Evans®
and
Owens®
for our food products business and SWH Custom
Foods®
for our prep kitchen services, as well as the Bob Evans and
Mimis Café logos. We maintain a registration program
for our marks with the United States Patent and Trademark Office
and in certain foreign countries. In order to better protect our
brands, we have also registered our ownership of the Internet
domain names www.bobevans.com and
www.mimiscafe.com. We believe that our trademarks,
service marks, proprietary recipes and other proprietary rights
have significant value and are important to our brand-building
efforts and the marketing of our restaurant concepts and food
products. We have vigorously protected our proprietary rights in
the past and expect to continue to do so. We cannot predict,
however, whether steps taken by us to protect our proprietary
rights will be adequate to prevent misappropriation of these
rights or the use by others of restaurant features based upon,
or otherwise similar to, our concepts. It may be difficult for
us to prevent others from copying elements of our restaurant
concepts and food products, and any litigation to enforce our
rights would likely be costly.
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Government
Regulation
We are subject to numerous federal, state and local laws
affecting our businesses. Our restaurants are subject to
licensing and regulation by a number of governmental
authorities, which may include health, sanitation,
environmental, zoning and public safety agencies in the state or
municipality in which the restaurant is located. Difficulties in
obtaining or failures to obtain the required licenses or
approvals could delay or prevent the development and openings of
new restaurants or could disrupt the operations of existing
restaurants. However, we believe that we are in compliance in
all material respects with all applicable governmental
regulations and, to date, we have not experienced abnormal
difficulties or delays in obtaining the licenses or approvals
required to open or operate any of our restaurants.
Various federal and state labor laws govern our operations and
our relationships with our employees, including such matters as
minimum wage, meal and rest breaks, overtime, fringe benefits,
safety, working conditions and citizenship requirements.
Significant government-imposed increases in minimum wages, paid
or unpaid leaves of absence, paid sick days or other
paid time off, mandated health benefits for all employees or
increased tax reporting, assessment or payment requirements
related to our employees who receive gratuities could be
detrimental to the profitability of our restaurants and food
products operations. Minimum wage increases at the federal level
and in California, Ohio, and many other states in which we
operated during fiscal 2009 affected the profitability of our
restaurant and food products businesses and led to increased
menu prices. Various proposals that would require employers to
provide paid time off for all of their employees are considered
from
time-to-time
in Congress and various states.
The costs of insurance and medical care have risen significantly
over the past few years and are expected to continue to
increase. Existing or potential legislation changes, such as
proposals to require employers to provide health insurance to
all employees, could negatively impact our operating results.
The imposition of any requirement that we provide paid time off
or health insurance to all employees could have an adverse
effect on our results of operations and financial position, as
well as the restaurant industry in general. Our suppliers may
also be affected by higher minimum wage and benefit standards,
which could result in higher costs for goods and services
supplied to us.
We have a significant number of hourly restaurant employees that
receive tip income. We have elected to voluntarily participate
in a Tip Reporting Alternative Commitment (TRAC)
agreement with the Internal Revenue Service. By complying with
the educational and other requirements of the TRAC agreement, we
reduce the likelihood of potential employer-only FICA
assessments for unreported or underreported tips.
There have been a number of federal, state and local proposals
and regulations to require restaurants to provide nutritional
information on menus
and/or
require that restaurants label menus with the country of origin
of meal ingredients. For example, our Mimis Cafés
located in California are subject to a state-wide menu labeling
law that became effective on July 1, 2009, and our Bob
Evans Restaurant located in Montgomery County, Maryland is
subject to a menu-labeling law that becomes effective on
July 1, 2010. The national health care reform legislation
enacted on March 23, 2010 contains provisions that require
restaurants with 20 or more locations to post calorie
information on menus and additional nutritional information in
writing at the restaurant. The FDA is currently drafting
specific regulations which it must implement within one year
from the date of passage of the federal legislation. Although
the new federal legislation preempts the legislation already
enacted in California, Montgomery County, Maryland, and other
state and local jurisdictions (e.g., Maine, Massachusetts, New
Jersey, Oregon, New York City and Philadelphia), these
jurisdictions are requiring compliance with their regulations
until the FDA regulations are enacted. We are concerned that the
imposition of menu-labeling laws could have an adverse effect on
our results of operations and financial position, as well as the
restaurant industry in general. However, we support the
implementation of uniform standards across the United States by
the FDA, rather than a
state-by-state
and
locality-by-locality
approach.
Potential changes in labor laws, including the possible passage
of all or parts of the proposed Employee Free Choice Act
(EFCA), could result in portions of our workforce
being subjected to greater organized labor influence. The EFCA,
also referred to as the card check bill, could
impact the nature of labor relations in the United States,
specifically, how union elections and contract negotiations are
conducted. The EFCA aims to make it easier for unions to form,
and employers of unionized employees may face mandatory, binding
arbitration of labor scheduling, costs and standards, which
could increase the costs of doing business. Although we do not
currently
15
have any union employees, EFCA or similar labor legislation
could have an adverse effect on our business and financial
results by imposing requirements that could potentially increase
our costs, reduce our flexibility and impact our ability to
service our guests.
Our restaurants and manufacturing plants must comply with the
applicable requirements of the Americans with Disabilities Act
of 1990 (ADA) and related state statutes. The ADA
prohibits discrimination on the basis of disability with respect
to public accommodations and employment. Under the ADA and
related state laws, when constructing new restaurants and
facilities or undertaking significant remodeling of existing
restaurants and facilities, we must make them more readily
accessible to people with disabilities. We also must make
reasonable accommodations for the employment of people with
disabilities. The ADA was amended to significantly expand the
categories of individuals who are deemed to have disabilities.
Alcoholic beverage control regulations require each Mimis
Café to apply to a state authority and, in certain
locations, county and municipal authorities for licenses and
permits to sell alcoholic beverages on the premises. Typically,
licenses must be renewed annually and may be subject to
penalties, temporary suspension or revocation for cause at any
time. Alcoholic beverage control regulations impact many aspects
of the daily operations of our Mimis Cafés, including
the minimum ages of patrons and employees, employee alcoholic
beverage training, hours of operation, advertising, wholesale
purchasing, inventory control and the handling, storage and
dispensing of alcoholic beverages. We have not encountered any
significant problems related to alcoholic beverage licenses to
date.
Mimis Cafés located in certain states may be subject
to dram-shop statutes, which generally provide a
person injured by an intoxicated person with the right to
recover damages from an establishment that wrongfully served
alcoholic beverages to the intoxicated person. We train our
Mimis Café employees how to serve alcohol and we
carry liquor liability coverage as part of our existing
comprehensive general liability insurance. We have never been
named as a defendant in a lawsuit involving
dram-shop statutes.
As a manufacturer and distributor of food products, we are
subject to a number of food safety regulations, including
regulations promulgated by the U.S. Department of
Agriculture (USDA) and the FDA. These agencies enact
and enforce regulations relating to the manufacturing, labeling,
packaging, distribution and safety of food in the United States.
Among other matters, these agencies: enforce statutory
prohibitions against misbranded and adulterated foods; establish
safety standards for food processing; establish standards for
ingredients and manufacturing procedures for certain foods;
establish standards for identifying certain foods; determine the
safety of food additives; establish labeling standards and
nutrition labeling requirements for food products; and enforce
regulations to prevent the introduction, transmission or spread
of communicable diseases. In addition, various states regulate
our operations by: enforcing federal and state standards for
selected food products; grading food products; licensing and
inspecting plants and warehouses; regulating trade practices
related to the sale of food products; and imposing their own
labeling requirements on food products. Some of the food
commodities we use in our operations are also subject to
governmental agricultural programs. These programs have
substantial effects on prices and supplies and are subject to
Congressional and administrative review.
Through our sausage manufacturing operations, our food products
business is subject to the requirements of the
Packers & Stockyards Act (the P&S
Act). The general purpose of the P&S Act is to:
(1) assure fair competition and fair trade practices;
(2) safeguard farmers and ranchers; (3) protect
consumers; and (4) protect members of the livestock, meat
and poultry industries from unfair, deceptive, unjustly
discriminatory and monopolistic practices. The P&S Act is
administered by the Grain Inspection, Packers &
Stockyards Administration (GIPSA), which is part of
the USDA. Among other requirements, the P&S Act requires
meat packers, such as our food products business, to be bonded,
provides trust protection for producers in the event they are
not paid for livestock by a meat packer, and requires that
livestock producers be paid promptly by meat packers for the
sale of livestock. Violations of the P&S Act may be
resolved through a notice of violation, a stipulation agreement
with GIPSA, administrative actions and court actions. During
fiscal 2010, we resolved an administrative action filed against
us alleging violations of the prompt pay requirements of the
P&S Act. The settlement of this matter will not have a
material adverse effect on our financial condition or results of
operations.
We are subject to federal and state environmental regulations,
including various laws concerning the handling, storage and
disposal of hazardous materials, such as cleaning solvents.
These regulations have not had a material adverse effect on our
operations to date. We do not anticipate that compliance with
federal, state and local provisions
16
regulating the discharge of materials into the environment, or
which otherwise relate to the protection of the environment,
will have a material adverse effect upon our capital
expenditures, revenues or competitive position.
U.S. federal, state and local laws and regulations are
increasingly being enacted to address concerns about the effects
that carbon dioxide emissions and other identified greenhouse
gases (GHG) may have on the environment and climate
worldwide. These effects are widely referred to as Climate
Change. In the U.S., Climate Change legislation is
currently pending in Congress and, if enacted, would limit GHG
emissions from covered entities through a cap and
trade system to reduce the quantity of national GHG
emissions in accordance with established goals and time lines.
One or more of our food processing facilities could be covered
by such new legislation. There also has been recent regulatory
activity relative to the regulation of GHG emissions by the
U.S. Environmental Protection Agency (EPA)
under the Clean Air Act, including the proposed mandatory
reporting of greenhouse gases rule. Additionally, several states
already have taken steps to require the reduction of GHGs by
certain companies and public utilities, primarily through the
planned development of GHG inventories
and/or
regional GHG cap and trade programs. GHG emissions occur at
several points across our operations, including production,
transportation and processing. Our compliance with any future
legislation or regulation of GHGs, if it occurs, may result in
increased compliance and operating costs. It is not, however,
possible at this time to predict the structure or outcome of any
future legislative or regulatory efforts to address such
emissions or the eventual cost to us of compliance. Based on
information currently available to us, we believe that
compliance with these regulations will not have a material
adverse effect on us.
Employees
As of April 30, 2010, we employed 44,086 persons (full
and part-time), including 42,741 persons in our restaurant
business and 1,345 persons in our food products business.
None of our employees are currently covered by collective
bargaining agreements, and we have never experienced an
organized work stoppage, strike or labor dispute. We believe our
working conditions and compensation packages are generally
comparable with those offered by our competitors. We consider
overall relations with our employees to be favorable.
Available
Information
Our Internet Web site address is www.bobevans.com. Our annual
reports on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K
and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of
1934 are available through our Web site as soon as reasonably
practicable after such material is electronically filed with, or
furnished to, the Securities and Exchange Commission. The
information contained on or connected to our Web site is not
incorporated into this Annual Report on
Form 10-K.
Upon the written request of a stockholder, we will provide
without charge a copy of this Annual Report on
Form 10-K,
including the financial statements and financial statement
schedules included herein. In addition, upon the written request
of a stockholder, we will provide a copy of any exhibit to this
Annual Report on
Form 10-K
upon the payment of a reasonable fee. Written requests should be
delivered to Bob Evans Farms, Inc., Attention: Investor
Relations, 3776 South High Street, Columbus, Ohio 43207.
The risk factors presented below may affect our future
operating results, financial position and cash flows. In
addition to the risk factors presented below, changes in general
economic conditions, consumer tastes and discretionary spending
patterns, demographic trends and consumer confidence in the
economy, which affect consumer behavior and spending for
restaurant dining occasions and retail purchases in general, may
have a material adverse effect on us. Our actual results could
vary significantly from any results expressed or implied by any
forward-looking statements contained in this Annual Report on
Form 10-K
or our other filings with the Securities and Exchange Commission
depending upon a variety of factors, including, but not limited
to, the following risks and uncertainties:
17
Our
business could suffer if we are the subject of negative
publicity or litigation regarding allegations of food-related
illnesses.
As a
multi-unit
restaurant business and food products business, we can be
adversely affected by complaints or litigation from consumers
alleging illness, injury or other food quality, adverse health
effects (including obesity) or operational concerns. Our
reputation and business can also be adversely affected by
negative publicity resulting from such complaints or litigation.
Food-related illnesses may be caused by a variety of foodborne
pathogens, such as
e-coli or
salmonella, and from a variety of illnesses transmitted by
restaurant workers, such as hepatitis. Foodborne illness
incidents could also be caused by food suppliers and
distributors. As a result, we cannot control all of the
potential sources of illness that can be transmitted from food.
If any person becomes ill, or alleges becoming ill, as a result
of eating our food, we may be liable for damages, be subject to
governmental regulatory action
and/or
receive adverse publicity, regardless of whether the allegations
are valid or whether we are liable, any of which could have
long-lasting, negative effects on our financial position and
results of operations.
Legislation
and regulations requiring the display and provision of
nutritional information for our menu offerings in our
restaurants could increase our operating costs, affect consumer
preferences, increase the likelihood of litigation, and
negatively impact our results of operations.
We are concerned about regulations requiring restaurants to
provide calorie and other nutritional information on menus
and/or in
our restaurants. Our Mimis Cafés located in
California are subject to a state-wide menu labeling law that
became effective on July 1, 2009, and our Bob Evans
Restaurant located in Montgomery County, Maryland is subject to
a menu labeling law that becomes effective on July 1, 2010.
The national health care reform legislation enacted on
March 23, 2010, contains provisions that require
restaurants with 20 or more locations to post calorie
information on menus and additional nutritional information in
writing at the restaurant. The FDA is currently drafting
specific regulations which it must implement within one year
from the date of passage of the federal legislation. Although
the new federal legislation preempts the legislation already
enacted in California, Montgomery County, Maryland, and other
state and local jurisdictions (e.g., Maine, Massachusetts, New
Jersey, Oregon, New York City and Philadelphia), some of these
jurisdictions are requiring compliance with their regulations
until the FDA regulations are enacted.
Menu labeling regulations could have an adverse effect on our
results of operations and financial condition due to the
potential impact on our sales and profitability if the
disclosures change guest preferences and menu mix, as well as
increased operating costs incurred to comply with these
regulations. Moreover, we could become subject to litigation
arising from our nutritional disclosures, such as claims that
our nutritional disclosures are inaccurate or that our menu
offerings are harmful to human health.
The
financial performance and results of operations of our food
products business could be adversely affected by availability of
and price we pay for sows.
The most important raw material used in our food products
business is live sows, which we depend upon to produce our pork
sausage products. We procure live sows at prevailing market
prices from terminals, local auctions, country markets and
corporate and family farms in many states and Canada. The live
sow market is highly cyclical in terms of the number of sows
available and the current market price. During fiscal 2010,
there was a significant contraction in the live sow market, and
we believe that the sow herd is at its lowest level since the
early 1900s. The live sow market is also dependent upon
supply and demand for pork products, as well as corn and soybean
meal prices (the major food supply for sows), weather and
farmers access to capital. The live sow market has been
extremely volatile over the past several years, with our sow
costs averaging $42 per hundredweight in fiscal 2010, $45 per
hundredweight in fiscal 2009 and $35 per hundredweight in fiscal
2008.
In fiscal 2011, we believe our food products segment will
continue to be challenged by sow costs that are significantly
higher than historical averages, as well as limited supplies of
sows. We estimate our fiscal 2011 sow costs will be in the range
of $55 to $60 per hundredweight, compared to $42 in fiscal 2010.
Higher sow costs adversely affect the profitability of our food
products business, and we cannot assure you that we will be able
to pass along any portion to our food products consumers in a
timely manner or at all.
18
Health
concerns and government regulations relating to the consumption
of trans-fats, pork, beef, chicken and other food products could
affect consumer preferences and could negatively impact our
results of operations.
Consumer food preferences could be affected by health concerns
about the consumption of various types of food, such as
trans-fats, pork, beef and chicken. Negative publicity
concerning trans-fats related to fried foods and other items,
mad cow and
foot-and-mouth
disease relating to the consumption of beef and other meat
products, H1N1 or swine flu related to
pork products, avian flu related to poultry products
and the publication of government, academic or industry findings
about health concerns relating to menu items served by any of
our restaurants could also affect consumer food preferences.
These types of health concerns and negative publicity concerning
our food products may adversely affect the demand for our food
and negatively impact our business and results of operations.
Additionally, some government authorities are increasing
regulations regarding trans-fats, and sodium which may require
us to limit or eliminate trans-fats and sodium from our menu
offerings
and/or food
products. For example, our Mimis Cafés located in
California are subject to a state-wide trans-fat ban which began
in 2010. These regulations may require us to switch to higher
cost ingredients and may hinder our ability to operate in
certain markets.
The success of our restaurant operations is dependent, in part,
upon our ability to effectively respond to changes in consumer
health and disclosure regulations and to adapt our menu
offerings to trends in eating habits. If consumer health
regulations or consumer eating habits change significantly, we
may be required to modify or delete certain menu items. To the
extent we are unable to respond with appropriate changes to our
menu offerings, it could materially affect customer demand and
have an adverse impact on our revenues.
The
global economic crisis adversely impacted our business and
financial results in fiscal 2010, and a prolonged recession
could have a material adverse effect on us in the
future.
The restaurant industry is dependent upon consumer discretionary
spending. The global economic crisis has reduced consumer
confidence to historic lows impacting the publics ability
and desire to spend discretionary dollars as a result of job
losses, home foreclosures, significantly reduced home values,
investment losses in the financial markets, personal
bankruptcies and reduced access to credit, resulting in lower
levels of guest traffic in our restaurants. If this difficult
economic situation continues for a prolonged period of time or
deepens in magnitude, our business and results of operation
could be materially adversely effected and may result in a
further deceleration of the number and timing of new restaurant
openings. Continued deterioration in guest traffic and a
reduction in the average amount guests spend in our restaurants
will negatively impact our revenues. This will result in
spreading fixed costs across a lower level of sales, and will,
in turn cause downward pressure on our profitability. This could
result in asset impairment charges and potential restaurant
closures. Future recessionary effects on us are unknown at this
time and could have a material adverse effect on our financial
position and results of operations.
Certain
economic and business factors specific to the restaurant
industry and certain general economic factors including
unemployment, energy prices and interest rates that are largely
out of our control may adversely affect our results of
operations.
The results of operations of our restaurant concepts depend upon
a number of industry-specific and general economic factors, many
of which are beyond our control. The restaurant industry is
affected by changes in national, regional and local economic
conditions, consumer spending patterns and consumer preferences.
Recessionary economic cycles, a protracted economic slowdown, a
worsening economy, increased unemployment, decreased salaries
and wage rates, increased energy prices, inflation, rising
interest rates or other industry-wide cost pressures affect
consumer behavior and decrease spending for restaurant dining
occasions, leading to a decline in our sales and earnings. When
gasoline, natural gas, electricity and other energy costs
increase, and credit card, home mortgage and other borrowing
costs increase with rising interest rates, our guests may have
less disposable income and reduce the frequency with which they
dine out. This is particularly the case with casual dining
concepts like Mimis Café because consumers may choose
more inexpensive restaurants (such as quick-service restaurants
or fast casual dining) when eating outside the home. Unfavorable
changes in the factors described above or in other business and
economic conditions affecting our customers could increase our
costs, reduce traffic in some or all of
19
our restaurants or impose practical limits on pricing, any of
which would lower our profit margins and have a material adverse
effect on our financial condition and results of operations.
Because
many of our restaurants are concentrated in certain geographic
areas, there could be a material adverse effect on our
operations by regional economic conditions and
events.
The concentration of many of our existing and planned
restaurants in particular regions of the United States could
affect our operating results in a number of ways. For example,
our results of operations may be adversely affected by economic
conditions in that region, the local labor market and regional
competition. Also, adverse publicity relating to our restaurants
in a region in which they are concentrated could have a more
pronounced adverse effect on our overall revenue than might be
the case if our restaurants were more broadly dispersed.
A majority of our Bob Evans Restaurants are located in Ohio and
other parts of the Midwest, which makes us particularly
sensitive to economic conditions, natural disasters, severe
weather and other events in this region. We believe same-store
sales at our Bob Evans Restaurants are particularly sensitive to
economic conditions in the Midwest, which has been hit
particularly hard by the downturn in the United States
economy, the troubled auto industry, increased unemployment and
lower home values. Nearly 250 Bob Evans Restaurants are located
in Michigan and Ohio where the impact of job losses in the
automotive industry (manufacturers and suppliers) could have a
material adverse effect on our sales. Also, because a
significant percentage of our Mimis are located in
California, we are also particularly sensitive to events and
developments in that state, such as earthquakes or other natural
disasters and energy shortages. We are particularly concerned
about Mimis sales and profit trends in California,
Florida, Arizona and Nevada. These states accounted for
approximately 70 percent of Mimis sales in fiscal
2010 and have been hit particularly hard by the downturn in the
United States economy,
sub-prime
mortgage issues, increased unemployment and lower home values.
Our
failure to achieve and maintain positive same-store sales for an
extended period of time would likely have a material adverse
effect upon our financial condition, results of operation and
cash flows.
Same-store sales are a key measure of the financial health of
our company, as well as our individual restaurants. Same-store
sales growth may be affected by a number of factors, including:
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local and national economic conditions affecting consumer
spending habits;
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gasoline prices;
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customer trends;
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intense competition in the restaurant business;
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customer satisfaction;
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extraordinary events such as weather or natural
disasters; and
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pricing pressure.
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In fiscal 2010, same-store sales at Mimis decreased
7.2 percent and Bob Evans Restaurants same-store
sales decreased 3.5 percent. Our failure to achieve and
maintain positive same-store sales for extended periods of time
for either of our restaurant concepts would have a material
adverse effect upon our business, results of operations and
financial condition.
Our
business could suffer if we are the subject of increased
litigation regarding personal injuries suffered on our premises,
discrimination, harassment or other labor matters.
Employee and customer claims against us based on, among other
things, personal injury, discrimination, harassment, wage and
hour disputes or wrongful termination may divert our financial
and management resources from operating our businesses.
Restaurant companies have been the target of class actions and
other lawsuits alleging, among other things, violation of
federal and state law. Like many employers, Mimis has been
faced with allegations of purported
class-wide
wage and hour violations in California, and we have taken
charges related to the settlement of these cases.
20
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 alleges 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 seeks 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 preliminary approval of a settlement in the amount of
$1,030,000 in January 2010. We recently completed the
administration of claims, and the Orange County Superior Court
granted final approval of the settlement on June 10, 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. Mr. Diaz and Ms. Gray
purport to represent a class of various nonexempt employees,
including bartenders, hosts and servers, who are allegedly
similarly situated. The case involves claims that current and
former nonexempt employees working in these positions in
California from October 2005 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 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.
The
restaurant and food products industries are heavily regulated,
and compliance with applicable laws and regulations may be more
costly than we expect.
The restaurant industry and the food products industry are
subject to various federal, state and local laws and
regulations. Compliance with these legal requirements may be
more costly than we expect. The failure to obtain
and/or
retain licenses, permits or other regulatory approvals could
delay or prevent the opening of a restaurant
and/or the
continued operation of a particular restaurant or food products
manufacturing facility. Our failure to comply with applicable
laws and regulations could also result in fines or legal actions
that could adversely affect our business, results of operations
and financial position. Significant legal and regulatory issues
affecting our business include:
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employment laws, including minimum wage requirements, overtime
pay, meal and rest break requirements, paid sick
days or other paid time off, unemployment tax rates,
discrimination laws, workers compensation rates and
citizenship and immigration requirements;
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national health care reform legislation that passed the
U.S. Congress in March 2010 and its provisions that will
require labeling on restaurant menus, menu boards, and
drive-through displays;
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permit, licensing and other regulatory requirements for the sale
of food and alcoholic beverages;
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health, safety and fire regulations;
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zoning, land and environmental regulations;
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sales tax;
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food safety regulations governing the manufacture (including
composition and ingredients), labeling, packaging and safety of
food in the United States and Canada;
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laws governing public access and employment for people with
disabilities; and
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state dram shop statutes, which generally allow a
person injured by an intoxicated person to recover damages from
an establishment that wrongfully served alcoholic beverages to
the intoxicated person.
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A
privacy breach could adversely affect our
business.
The protection of customer, employee and company data is
critical to us. The regulatory environment surrounding
information security and privacy is increasingly demanding, with
the frequent imposition of new and constantly changing
requirements. Compliance with these requirements may result in
cost increases due to necessary systems changes and the
development of new administrative processes. In addition,
customers have a high expectation that we will adequately
protect their personal information. If we fail to comply with
these laws and regulations or experience a significant breach of
customer, employee or company data, our reputation could be
damaged and we could experience lost sales, fines or lawsuits.
Our
success depends on our ability to compete effectively in the
restaurant and food products industries.
The restaurant industry is highly competitive and is affected by
changes in the publics eating habits and preferences,
population trends, traffic patterns and weather conditions, as
well as by local and national economic conditions affecting
consumer spending habits, many of which are beyond our control.
Key competitive factors in the restaurant industry include the
quality and value of the menu items offered, quality and speed
of service, attractiveness of facilities, advertising, name
brand awareness and image and restaurant locations. Many of our
competitors are well-established national, regional or local
chains, and some have substantially greater financial, marketing
and other resources than we have, which may give them
competitive advantages. We also compete with many restaurant
operators and other retail establishments for site locations and
restaurant employees. We expect competition to intensify as our
competitors expand operations in our markets and quick-service
restaurant chains expand their breakfast offerings. This
increased competition could have a material adverse effect on
our financial position or results of operations.
The food products business is also highly competitive and is
affected by changes in the publics eating habits and
preferences, as well as by local and national economic
conditions affecting consumer spending habits. Key competitive
factors in the industry include the quality, flavor and value of
the food products offered, advertising and name brand awareness.
Our competitors include well-established national, regional and
local producers and wholesalers of similar products, many of
whom have substantially greater name recognition and financial,
marketing and other resources than we have, which may give them
competitive advantages. We are facing increased competition from
private label sausage products and side dishes. We expect
competition to intensify in our food products segment as other
food companies introduce refrigerated side dishes to compete
with our successful mashed potatoes and macaroni and cheese
products. This increased competition could have a material
adverse effect on our financial position or results of
operations.
The
price and availability of food, ingredients and utilities used
by our restaurants could adversely affect our revenues and
results of operations.
Our business is subject to the general risks of inflation. Our
results of operations depend significantly on our ability to
anticipate and react to changes in the price and availability of
food, ingredients, utilities, and other related costs over which
we may have little control. Fluctuations in economic conditions,
weather and demand, as well as natural disasters can adversely
affect the availability, quality and cost of the ingredients and
products that we buy. We require fresh produce, dairy products
and meat, and therefore are subject to the risk that shortages
or interruptions in supply of these food products could develop.
Our operating margins are subject to changes in the price and
availability of food commodities. For example, during fiscal
2010, the profitability of our food products segment was
negatively impacted by supply issues as well as by price
volatility including record high sow costs in the fourth
quarter, which represent the majority of food products segment
cost of sales. The effect of, introduction of, or changes to
tariffs or exchange rates on imported retail products or food
products could increase our costs and possibly affect the supply
of those products. Our operating margins are also affected by
fluctuations in the price of utilities such as natural gas,
whether as a result of inflation or otherwise, on which our
restaurants
22
depend for much of their energy supply. Our inability to
anticipate and respond effectively to an adverse change in any
of these factors could have a significant adverse effect on our
results of operations. In addition, because we provide a
moderately priced product, we may not seek or be able to pass
along price increases to our guests sufficient to offset cost
increases.
Our
inability to successfully and sufficiently raise menu and food
products prices to offset increased costs could result in a
decline in margins.
We utilize price increases for menu offerings and food products
to help offset cost increases, including increased costs for
wholesale food, raw materials, distribution, minimum wages,
employee benefits, construction, fuel, utility, inflation and
other costs. During fiscal 2010, we implemented menu price
increases at a significant number of Bob Evans Restaurants and
Mimis Cafés to help offset operating and supply cost
increases. Further federal legislation to increase the minimum
wage as well as the tip credit wage we pay to certain staff
members receiving guest gratuities is probable, and there may be
similar increases implemented in other jurisdictions in which we
operate or seek to operate. Additional minimum wage increases
could have a material adverse effect on our labor costs. Our
food products business is also sensitive to sow costs. During
fiscal 2010, the profitability of our food products segment was
negatively impacted by a significant and rapid increase in sow
costs compared to previous years. We believe our food products
segment will continue to be challenged by high sow costs in
fiscal 2011. We may not be able to anticipate and react to
changing costs by adjusting our purchasing practices and prices
to sufficiently account for increased costs, especially further
minimum wage increases at the federal
and/or state
level. Also, because we offer moderately priced food, we may not
be able to, or we may choose not to, pass along price increases
to our customers, which could have a material adverse effect on
our business and results of operations.
Our
success depends on consumer acceptance of our menu offerings,
food products, prices, atmosphere and service
procedures.
Our success in creating demand for our restaurant menu offerings
and food products is dependent on our ability to continue to
accurately predict consumer dining and taste preferences and
adapt our menu and food products to trends in food consumption.
If customer eating habits change significantly and we are unable
to respond with appropriately priced menu offerings and food
products, it could have a material adverse effect on demand for
our menu offerings and food products, which would result in lost
customers and a material adverse effect on our business and
results of operations. Our success is also dependent upon our
ability to keep the atmosphere of our two restaurant concepts
relevant and provide satisfactory customer service. If we change
a restaurant concept or customer service technique, we may lose
customers who do not prefer the changed concept or customer
service technique, and we may not be able to attract a
sufficient new customer base to produce the revenue needed to
make the concept or technique profitable.
Catastrophic
events may disrupt our business and could adversely affect our
revenues and results of operations.
We are a highly automated business and rely on our production
facilities and our network infrastructure and our Web site for
our development, marketing, operational, support, hosted
services and sales activities. A disruption, infiltration or
failure of these systems or third party hosted services in the
event of a major earthquake, fire, power loss,
telecommunications failure, cyber attack, war, terrorist attack,
or other catastrophic event could cause system interruptions,
reputational harm, loss of intellectual property, delays in our
product development, lengthy interruptions in our services,
breaches of data security and loss of critical data.
Our food products business has seven manufacturing plants which
we believe have adequate capacity to serve their intended
purpose. If we were forced to close or delay production at one
or more of these plants due to a natural disaster or significant
labor issue, we may be unable to increase production at our
other plants in a timely manner, which could have a material
adverse effect on our results of operations. Also, Mimis
Cafés rely on a single site prep kitchen for preparation of
substantially all of the concepts signature muffin mixes,
dressings, sauces and soups. Any temporary or permanent
disruption in the operation of this facility would affect the
ability of Mimis to serve
23
the full range of menu offerings or require us to obtain these
items from alternative sources, which could have a material
adverse effect on our results of operations.
In fiscal 2009, Hurricane Ike and its remnants affected our
business operations as hurricane-force winds caused widespread
power outages in parts of the Midwest, primarily Indiana,
Kentucky and Ohio. These power outages affected power supply to
three Mimis Cafés located in Kentucky and Ohio,
approximately 60 Bob Evans Restaurants located in Indiana,
Kentucky and Ohio and our corporate headquarters in Columbus,
Ohio. Additionally, our manufacturing plant in Xenia, Ohio
temporarily ceased operations as a result of a power outage.
We have developed certain disaster recovery plans and certain
backup systems to reduce the potentially adverse effect of such
events, but a catastrophic event that results in the destruction
or disruption of any of our data centers or our critical
business or information technology systems could severely affect
our ability to conduct normal business operations and, as a
result, our future operating results could be adversely affected.
Our
food products business is dependent upon a limited number of
suppliers for the production of a significant number of items
and relies upon a relatively small number of customers for a
large percentage of its sales.
Our food products business is dependent upon a limited number of
suppliers, and we have not identified secondary suppliers for
food products manufactured in our plants. Our prolonged
inability to provide products to fill orders in a timely manner
would have an adverse effect on both our restaurant and food
products businesses and our results of operations. Our food
products business also relies upon a relatively small number of
customers for a large percentage of its sales. For fiscal 2010,
our largest 10 accounts represented approximately
60 percent of our total food products sales, with Wal-Mart
Stores, Inc. (and its affiliates) and The Kroger Co. each
accounting for over 10 percent of our food products segment
sales. Our inability to maintain strong relationships with our
key customers could result in a loss of business, which would
have a material adverse effect on our food products business and
our results of operations.
We are
dependent on timely delivery of fresh ingredients by our
suppliers.
Our restaurant operations are dependent on timely deliveries of
fresh ingredients, including fresh produce, dairy products and
meat. The cost, availability and quality of the ingredients we
use to prepare our food are subject to a variety of factors,
many of which are beyond our control. Fluctuations in weather,
supply and demand, the economy and political conditions could
adversely affect the cost, availability and quality of our
ingredients. If the variety or quality of our food products
declines due to the lack or lower quality of our ingredients or
due to interruptions in the flow of fresh ingredients, customer
traffic may decline and negatively affect our sales. We have
contracted with third-party distributors for the delivery of
food and other products to our restaurants. If these contracts
were suddenly and unexpectedly terminated, supply costs could
increase and disruptions in distribution could occur during the
transition to other third-party distributors.
Our
long-term growth strategy depends on opening new restaurants.
Our ability to expand our restaurant base is influenced by
factors beyond our control, which may further slow restaurant
expansion and impair our growth strategy.
We are pursuing a moderate and disciplined long-term growth
strategy which, to be successful, will depend in large part on
our ability to open new restaurants and operate those
restaurants on a profitable basis. Currently, we do not believe
that our average new restaurant volumes generate a level of
return on our development costs that justifies significant
expansion of Bob Evans Restaurants or Mimis Cafés. We
do not intend to substantially increase the construction of new
restaurants until the economy improves and we improve
restaurant level economics by increasing our sales,
lowering our labor, purchasing and construction costs and
increasing our margins and profitability. We cannot guarantee
that we will be able to achieve our expansion goals or operating
results similar to those of our existing restaurants. One of our
biggest challenges in meeting our long-term growth objectives
will be to locate and secure an adequate supply of suitable new
restaurant sites. We have experienced delays in opening some of
our restaurants and may experience delays in the future. Delays
or failures in opening new restaurants could
24
have a material adverse effect on our planned long-term growth
strategy. The success of our planned expansion will depend upon
numerous factors, many of which are beyond our control,
including the following:
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our ability to generate a suitable level of return on the money
we invest in new restaurants;
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the availability and hiring of qualified personnel;
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reliance on management to identify available and suitable
restaurant sites;
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competition for restaurant sites;
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negotiation of favorable purchase or lease terms for restaurant
sites;
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timely development of new restaurants, including the
availability of construction materials and labor;
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management of construction and development costs of new
restaurants;
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securing required governmental approvals and permits in a timely
manner, or at all;
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cost and availability of capital;
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competition in our markets; and
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general economic conditions.
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In addition, we contemplate entering new markets in which we
have no operating experience. These new markets may have
different demographic characteristics, competitive conditions,
consumer tastes and discretionary spending patterns than our
existing markets, which may cause the new restaurants to be less
successful in these new markets than in our existing markets.
Our long-term growth strategy may strain our management,
financial and other resources. For instance, our existing
systems and procedures, restaurant management systems, financial
controls, information systems, management resources and human
resources may be inadequate to support our planned expansion of
new restaurants. Also, we may not be able to respond on a timely
basis to all of the changing demands that the planned expansion
will impose on our infrastructure and other resources.
The
growth of our food products sales and profits is dependent upon
our ability to expand into existing and new
markets.
The successful growth of our food products business depends on
our ability to expand our reach into existing and new markets
through both the retention of new customers and the introduction
of new products. The expansion of our food products business
depends on our ability to obtain and retain large-account
customers, such as grocery store chains and warehouse customers,
and enter into long-term contracts with those customers. Our
failure to contract with new large-account customers or maintain
our contractual relationships with existing large-account
customers could have a material adverse effect on our food
products business and results of operations.
Our
quarterly operating results may fluctuate significantly and
could fall below the expectations of securities analysts and
investors due to a variety of other factors, resulting in a
decline in our stock price.
Our quarterly operating results may fluctuate significantly
because of several factors, including:
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fluctuations in food and commodity prices, including sow costs;
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the timing of new restaurant openings and related expenses;
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restaurant operating costs for our newly opened restaurants,
which are often materially greater during the first several
months of operation;
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labor availability and costs for hourly and management personnel;
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profitability of our restaurants, especially in new markets;
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impairments of long-term assets;
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trends in same-store sales;
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adverse weather conditions;
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special items, such as property sales;
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local and national economic conditions, including gasoline and
other energy costs; and
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changes in consumer preferences and competitive conditions.
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Our restaurant and food products businesses are also subject to
seasonal fluctuations. As a result, our quarterly and annual
operating results, same-store sales and comparable food products
sales may fluctuate significantly as a result of seasonality and
the factors discussed above. Accordingly, results for any one
quarter are not necessarily indicative of results to be expected
for any other quarter or for any fiscal year. If our quarterly
operating results fall below the expectations of securities
analysts and investors due to the factors discussed above, this
could result in a decline in our stock price.
If we
lose the services of any of our key management personnel, our
business could suffer.
Our future success significantly depends on the continued
services and performance of our key management personnel. Our
future performance will depend on our ability to motivate and
retain these and other key officers and key team members,
particularly regional and area managers and restaurant general
managers. Competition for high-quality employees is intense. The
loss of the services of members of our senior management or key
team members or the inability to attract additional qualified
personnel as needed could harm our business.
Many
factors, including those over which we have no control, affect
the trading price of our stock.
Factors such as reports on the economy or the price of
commodities, as well as negative or positive announcements by
competitors, regardless of whether the report relates directly
to our business, could have an impact of the trading price of
our common stock. The market price of our common stock may also
be affected by stock market conditions, including price and
trading fluctuations on the NASDAQ Stock Market, the New York
Stock Exchange or other exchanges. In addition to investor
expectations about our prospects, trading activity in our common
stock can reflect the portfolio strategies and investment
allocation changes of institutional holders, as well as
non-operating initiatives such as share repurchase programs. Any
failure to meet market expectations for our financial
performance, particularly with respect to comparable restaurant
sales, revenues, operating margins and earnings per share, would
likely cause our stock price to decline.
Disruptions
in the financial markets may adversely impact the availability
and cost of credit and consumer spending patterns.
Our ability to make scheduled payments or to refinance our debt
and to obtain financing for general corporate purposes will
depend on our operating and financial performance which, in
turn, is subject to prevailing economic conditions and to
financial, business and other factors beyond our control. Global
credit markets and the financial services industry have been
experiencing a period of unprecedented turmoil in recent months,
characterized by the bankruptcy, failure or sale of various
financial institutions and an unprecedented level of
intervention from the United States and other governments. These
events may adversely impact the availability of credit already
arranged, and the availability and cost of credit in the future.
There can be no assurances that we will be able to arrange
credit on terms we believe are acceptable or that permit us to
finance our business with historical margins. These events have
also adversely affected the U.S. and world economy, and any
new or continuing disruptions in the financial markets may also
adversely affect the U.S. and world economy, which could
negatively impact consumer spending patterns. There can be no
assurances that various U.S. and world government responses
to the disruptions in the financial markets in the near future
will restore consumer confidence, stabilize the markets, or
increase liquidity or the availability of credit. There can be
no assurances as to how or when this unprecedented period of
turmoil will be resolved.
As of April 30, 2010, we had available bank lines of credit
from two different lenders totaling $120.0 million,
consisting of a $75.0 million revolving line of credit (no
amount outstanding) and a $45.0 million revolving line of
26
credit ($14.0 million outstanding). We utilize our bank
lines of credit for liquidity needs, capital expansion, and
general corporate purposes. Under the $75.0 million
revolving line of credit, all outstanding amounts become due and
payable on April 19, 2011. Under the $45.0 million
bank line of credit, all outstanding amounts become due and
payable on December 1, 2010, subject to acceleration upon
the occurrence of certain specified events of default. If we are
unable to extend the maturity date of either line of credit, and
we are unable to secure adequate replacement financing on terms
we believe are acceptable or at all, there could be a material
adverse effect on our liquidity and financial condition.
Restrictive
covenants in our debt instruments restrict or prohibit our
ability to engage in or enter into a variety of transactions,
which could adversely affect us.
Our credit facilities and the agreements governing our senior
notes contain various covenants that limit, among other things,
our ability to: incur liens on our assets; merge or consolidate
with other entities; transfer or sell a substantial part of our
assets; substantially change the nature of our business; engage
in sale and leaseback transactions; and enter into transactions
with affiliates.
The agreements governing our senior notes contain additional
restrictive covenants, including financial maintenance
requirements relating to our: consolidated net worth; ratio of
consolidated indebtedness to consolidated capitalization; ratio
of consolidated income available for fixed charges to fixed
charges; and levels of priority indebtedness.
The covenants contained in our debt instruments could have a
material adverse effect on our business by limiting our ability
to take advantage of financing, merger, acquisition or other
corporate opportunities, to fund our business operations or to
successfully implement our current and future operating
strategies.
A
breach of a covenant in our debt instruments could cause
acceleration of a significant portion of our outstanding
indebtedness.
A breach of a covenant or other provision in any debt instrument
governing our current or future indebtedness could result in a
default under that instrument and, due to cross-default and
cross-acceleration provisions, could result in a default under
our other debt instruments. In addition, the agreements
governing our senior notes require us to maintain certain
financial ratios. Our ability to comply with these covenants may
be affected by events beyond our control (such as uncertainties
related to the current economy), and we cannot be sure that we
will be able to comply with these covenants at all times in the
future. Upon the occurrence of an event of default under any of
our debt instruments, the lenders could elect to declare all
amounts outstanding to be immediately due and payable and
terminate all commitments to extend further credit. If the
lenders under our current or future indebtedness accelerate the
payment of the indebtedness, we cannot be sure that our assets
would be sufficient to repay in full our outstanding
indebtedness.
Our
restaurant business is dependent upon satisfactory customer
service, and we may have difficulty hiring and retaining a
sufficient number of qualified employees to deliver appropriate
service.
Our success depends in part upon our ability to attract, train,
motivate and retain a sufficient number of qualified employees,
including restaurant managers, kitchen staff and servers who can
meet the high standards necessary to deliver the levels of food
quality and service on which our restaurant concepts are based.
The short supply of qualified individuals in some areas could
strain our restaurant operations, delay new restaurant openings
or require us to increase wages to attract desired individuals,
which could have a material adverse effect on our financial
position or results of operations. Also, high rates of employee
turnover could have a negative impact on food quality and
customer service, which would result in an adverse effect on our
restaurant business and results of operations.
Our
failure or inability to enforce our trademarks or other
proprietary rights could adversely affect our competitive
position or the value of our brand.
We believe that our trademarks, service marks and other
proprietary rights are important to our success and our
competitive position. Our primary trademarks, Bob
Evans®,
Mimis
Cafe®
and
Owens®,
are key components of our operating and marketing strategies. As
a result, we devote appropriate resources to the protection of
our
27
trademarks and other proprietary rights. The protective actions
that we take, however, may not be sufficient to prevent
unauthorized usage or imitation by others, which could harm our
image, brand or competitive position and, if we commence
litigation to enforce our rights, cause us to incur significant
legal costs.
In addition, third parties might claim that our trademarks or
menu offerings infringe upon their proprietary rights. Any such
claim, whether or not it has merit, could be time-consuming,
result in costly litigation, cause delays in introducing new
menu items or require us to enter into royalty or licensing
agreements. As a result, any such claim could have a material
adverse effect on our business, results of operations and
financial condition.
Our
current insurance loss estimates may not be adequate and, if
claims exceed such estimates, it could have a material adverse
effect on our profitability.
We are self-insured for a significant portion of our current
exposures related to our workers compensation, general
liabilities and employee health insurance programs. Although we
base our loss estimates on actuarial data, as well as on our
historical trends, we may not be able to accurately predict the
number or value of the claims that occur. In particular, health
insurance costs have increased significantly over the last
10 years. In the event that our actual liability exceeds
our estimate for any given period, or if we are unable to
control rapidly increasing health care costs, there could be a
material adverse effect on our level of profitability.
Adverse
weather conditions could harm our sales.
Weather conditions can adversely impact sales at our
restaurants. Adverse weather conditions, such as snow and ice in
the Midwest, that keep customers from dining out, result in lost
opportunities for our restaurants. Adverse weather conditions
may also cause shortages or interruptions in the supply of fresh
meat and produce to our restaurants and hamper the distribution
of our food products to grocery stores. Adverse weather
conditions adversely affected fiscal 2010 fourth quarter
restaurant sales.
Our
Certificate of Incorporation and Bylaws, as well as Delaware law
may have anti-takeover effects.
Provisions of our Certificate of Incorporation and Bylaws may
have the effect of discouraging, delaying or preventing a
merger, tender offer or proxy contest, which could have an
adverse effect on the market price of our common stock. In
addition, certain provisions of Delaware law applicable to our
Company could also delay or make more difficult a merger, tender
offer or proxy contest involving our company, including
Section 203 of the Delaware General Corporation Law, which
prohibits a Delaware corporation from engaging in any business
combination with any interested shareholder (as
defined in the statute) for a period of three years unless
certain conditions are met. In addition, our senior management
is entitled to certain payments and rights upon a change in
control of our Company.
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Item 1B.
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Unresolved
Staff Comments
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None.
The following provides a brief summary of the location and
general character of our principal plants and other physical
properties as of April 30, 2010.
We own our principal executive offices located at
3776 S. High St., Columbus, Ohio. We also own a
937-acre
farm located in Rio Grande, Ohio and a
30-acre farm
located in Richardson, Texas. The two farm locations support our
brand heritage and image through educational and tourist
activities.
Bob Evans
Restaurants
At the end of fiscal 2010, we owned the real estate for 491 of
our Bob Evans Restaurants and leased the real estate for the
remaining 78. The table located in Item 1 of this Annual
Report on
Form 10-K
shows the location of all of our Bob Evans Restaurants in
operation as of the end of fiscal 2010. The initial terms for
the majority of our Bob Evans Restaurant leases are
20 years and include options to extend the terms.
Additionally, we own 24 closed restaurants that we intend to
sell or lease in the future.
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We own approximately 17 acres of improved property commonly
known as the Southland Mall, located adjacent to our Bob Evans
Farms corporate headquarters in Columbus, Ohio. Part of our
corporate headquarters is located in this facility and we lease
space in the remainder of the facility.
Mimis
Cafés
The Mimis Café corporate offices are located in
Irvine, California, under a lease that expires in 2014. The SWH
Custom Foods prep kitchen is located in Fullerton, California,
under a
10-year
lease and has two five-year renewal options with the initial
term ending in July 2010. The Mimis Café décor
and furnishings warehouse is located in Corona, California,
under a lease that expires in July 2012.
At the end of fiscal 2010, we leased the real estate for all but
seven of our Mimis Cafés. The table located in
Item 1 of this Annual Report on
Form 10-K
shows the location of all of our Mimis Cafés in
operation as of the end of fiscal 2010. The initial terms for
the majority of our Mimis Café leases are
20 years and include options to extend the terms for up to
15 additional years.
Food
Products
Our food products business has seven manufacturing plants
located in Galva, Illinois, Hillsdale, Michigan, Bidwell,
Springfield and Xenia, Ohio and Sulphur Springs and Richardson,
Texas. We also operate a distribution center in Springfield,
Ohio. We own all of these properties.
During fiscal 2010, we completed an approximately
$16 million expansion of our Sulphur Springs, Texas
facility to add more capacity to produce fully cooked products.
We believe that our manufacturing facilities currently have
adequate capacity to serve their intended purpose. We believe
our facilities have adequate capacity over the next five years
and will position our food products business for growth during
that period.
We own a regional food products sales office in Westland,
Michigan. We lease various other locations throughout our food
products marketing territory which serve as regional and
divisional sales offices.
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Item 3.
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Legal
Proceedings
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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 alleges 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 seeks 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 preliminary approval of a settlement in
the amount of $1,030,000 in January 2010. We recently completed
the administration of claims, and the Orange County Superior
Court granted final approval of the settlement on June 10,
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. Mr. Diaz and Ms. Gray purport to
represent a class of various nonexempt employees, including
bartenders, hosts and servers, who are allegedly similarly
situated. The case involves claims that current and former
nonexempt employees working in these positions in California
from October 2005 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.
29
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
lawsuit 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 4.
|
Submission
of Matters to a Vote of Security
Holders.
|
Not applicable.
Supplemental
Item. Executive Officers of Bob Evans Farms,
Inc.
The following table sets forth the executive officers of Bob
Evans Farms, Inc. and certain information regarding each
executive officer as of June 25, 2010. The executive
officers are appointed by and serve at the pleasure of the Board
of Directors of Bob Evans Farms, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
Years as
|
|
|
Name
|
|
Age
|
|
Officer
|
|
Principal Occupation for Past Five Years
|
|
Harvey Brownlee
|
|
|
48
|
|
|
1
|
|
President and Chief Restaurant Operations Officer since February
2009; KFC Chief Operating Officer (Yum! Brands) from 2004 to
January 2009; Chief Operating Officer of Yum! Multibrand
Operations from 2003 to 2004
|
Mary L. Cusick
|
|
|
54
|
|
|
19
|
|
Senior Vice President Bob Evans Restaurant Marketing
since 2007; Senior Vice President Marketing and
Corporate Communications from 2005 to 2007; Senior Vice
President of Investor Relations and Corporate Communications
from 2000 to 2005
|
Steven A. Davis
|
|
|
52
|
|
|
4
|
|
Chief Executive Officer since May 2006; President, Long John
Silvers and A&W All-American Food Restaurants (Yum!
Brands), from 2002 to May 2006
|
Joe R. Eulberg
|
|
|
52
|
|
|
2
|
|
Executive Vice President Human Resources since March
2008; Executive Vice President of Human Resources, Acosta Sales
and Marketing (in-store sales, marketing and service company),
from March 2007 to August 2007; Senior Vice President of Human
Resources, Nash-Finch Company (wholesale food distributor), from
November 2003 to August 2006
|
Mary L. Garceau
|
|
|
37
|
|
|
4
|
|
Vice President, General Counsel and Corporate Secretary since
September 2007; Vice President, General Counsel and Assistant
Secretary from July 2006 to September 2007; Attorney, Vorys,
Sater, Seymour and Pease LLP, Partner from 2005 to June 2006,
Associate from 1997 to 2004.
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
Years as
|
|
|
Name
|
|
Age
|
|
Officer
|
|
Principal Occupation for Past Five Years
|
|
Richard B. Green
|
|
|
52
|
|
|
1
|
|
Chief Risk and Compliance Officer since February 2010; Vice
President -CAO and Controller, Embarq Corporation, from May 2007
to July 2009; Vice President - Financial Planning and Decision
Support, Embarq Corporation, from April 2004 May
2007.
|
Richard D. Hall
|
|
|
54
|
|
|
14
|
|
Executive Vice President Supply Chain Management
since September 2008; Senior Vice President
Corporate Procurement from August 2006 to September 2008; Vice
President Food Products Operations from May 1997 to
April 2007.
|
Randall L. Hicks
|
|
|
50
|
|
|
15
|
|
President and Chief Concept Officer Bob Evans
Restaurants since February 2009; Executive Vice
President Bob Evans Restaurant Operations from 2004
to February 2009; Senior Vice President of Restaurant Operations
2003 to 2004.
|
Edward A. Mitchell
|
|
|
44
|
|
|
January
2010
|
|
Vice President and Corporate Controller; Director of Corporate
Accounting at Greif, Inc. from March 2005 to September 2009.
|
Timothy J. Pulido
|
|
|
55
|
|
|
3
|
|
President and Chief Concept Officer Mimis
Café since February 2009; President Mimis
Café from December 2007 to February 2009; Chief Executive
Officer, Shakeys USA (pizza chain), from 2006 to December
2008; President and Chief Operating Officer, Pick Up Stix (a
quick-casual Asian restaurant chain), from 2003 to 2005.
|
Tod P. Spornhauer
|
|
|
44
|
|
|
11
|
|
Chief Financial Officer, Treasurer and Assistant Secretary since
September 2009; Senior Vice President Finance,
Controller, Assistant Treasurer and Assistant Secretary since
2003.
|
J. Michael Townsley
|
|
|
51
|
|
|
7
|
|
President Food Products since June 2008; Executive
Vice President Food Products from November 2006 to
June 2008; President and Chief Executive Officer, Owens Foods,
Inc. (formerly Owens Country Sausage, Inc.), from June 2003 to
November 2006.
|
PART II
|
|
Item 5.
|
Market
For Registrants Common Equity, Related Stockholder Matters
and Issuer Repurchases of Equity Securities
|
Market
Information, Holders of Common Equity and Dividends
The information required by Item 201(a) through (c) of
Regulation S-K
is incorporated herein by reference to Note H, Quarterly
Financial Data (Unaudited), to our consolidated financial
statements which are included in Item 8 of this Annual
Report on
Form 10-K.
31
Performance
Graph
Comparison
of Five-Year Cumulative Total Return
The following line graph compares the yearly percentage change
in our cumulative total stockholder return on our common stock
over our preceding five fiscal years against the cumulative
total return of the Standard & Poors 500 Stock
Index (S&P 500) and the weighted average of our
peer group. Our peer group is comprised of restaurant companies
listed on The NASDAQ Stock Market (weighted 80 percent) and
a group of meat producers listed on either The NASDAQ Stock
Market or the New York Stock Exchange (weighted
20 percent). We measure cumulative stockholder return by
dividing (a) the sum of (i) the cumulative amount of
dividends for the measurement period, assuming dividend
reinvestment, and (ii) the difference between the price of
our common stock at the end and the beginning of the measurement
period by (b) the price of our common stock at the
beginning of the measurement period.
CUMULATIVE
VALUE OF $100 INVESTMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
Peer Group
|
|
|
$
|
100.00
|
|
|
|
$
|
124.88
|
|
|
|
$
|
116.42
|
|
|
|
$
|
80.09
|
|
|
|
$
|
64.64
|
|
|
|
$
|
102.00
|
|
S&P 500
|
|
|
$
|
100.00
|
|
|
|
$
|
113.29
|
|
|
|
$
|
128.14
|
|
|
|
$
|
119.77
|
|
|
|
$
|
75.45
|
|
|
|
$
|
102.58
|
|
Bob Evans Farms, Inc.
|
|
|
$
|
100.00
|
|
|
|
$
|
144.32
|
|
|
|
$
|
186.57
|
|
|
|
$
|
145.21
|
|
|
|
$
|
129.19
|
|
|
|
$
|
168.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuer
Repurchases of Equity Securities
In May 2010, our Board of Directors authorized a share
repurchase program for fiscal 2011. The program authorized us to
repurchase, through April 29, 2011, up to
$25.0 million in shares of our outstanding common stock
from
time-to-time
on the open market or through privately negotiated transactions,
depending on market conditions.
32
|
|
Item 6.
|
Selected
Financial Data
|
Consolidated
Financial Review
Bob Evans Farms, Inc. and Subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
|
Dollars and shares in thousands, except per share amounts
|
|
Operating Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
1,726,804
|
|
|
$
|
1,750,512
|
|
|
$
|
1,737,026
|
|
|
$
|
1,654,460
|
|
|
$
|
1,584,819
|
|
Operating income
|
|
|
106,414
|
|
|
|
28,367
|
|
|
|
107,240
|
|
|
|
98,422
|
|
|
|
85,357
|
|
Income before income taxes
|
|
|
96,326
|
|
|
|
16,061
|
|
|
|
96,250
|
|
|
|
89,427
|
|
|
|
73,712
|
|
Income taxes
|
|
|
25,998
|
|
|
|
21,207
|
|
|
|
31,374
|
|
|
|
28,885
|
|
|
|
18,938
|
|
Net income (loss)
|
|
|
70,328
|
|
|
|
(5,146
|
)
|
|
|
64,876
|
|
|
|
60,542
|
|
|
|
54,774
|
|
Earnings (loss) per share of common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
2.29
|
|
|
$
|
(0.17
|
)
|
|
$
|
1.96
|
|
|
$
|
1.68
|
|
|
$
|
1.53
|
|
Diluted
|
|
$
|
2.28
|
|
|
$
|
(0.17
|
)
|
|
$
|
1.95
|
|
|
$
|
1.66
|
|
|
$
|
1.52
|
|
Financial Position
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital
|
|
$
|
(116,532
|
)
|
|
$
|
(165,545
|
)
|
|
$
|
(255,330
|
)
|
|
$
|
(94,490
|
)
|
|
$
|
(77,083
|
)
|
Property, plant and equipment net
|
|
|
961,974
|
|
|
|
1,002,692
|
|
|
|
999,011
|
|
|
|
963,363
|
|
|
|
967,717
|
|
Total assets
|
|
|
1,109,157
|
|
|
|
1,164,175
|
|
|
|
1,221,907
|
|
|
|
1,196,962
|
|
|
|
1,185,078
|
|
Debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
|
|
|
40,905
|
|
|
|
93,904
|
|
|
|
165,404
|
|
|
|
34,000
|
|
|
|
4,000
|
|
Long-term
|
|
|
149,287
|
|
|
|
176,192
|
|
|
|
133,096
|
|
|
|
172,333
|
|
|
|
206,333
|
|
Stockholders equity
|
|
|
638,157
|
|
|
|
597,706
|
|
|
|
612,625
|
|
|
|
705,231
|
|
|
|
704,456
|
|
Supplemental Information for the Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
$
|
51,266
|
|
|
$
|
95,985
|
|
|
$
|
120,955
|
|
|
$
|
84,242
|
|
|
$
|
112,860
|
|
Depreciation and amortization
|
|
$
|
83,988
|
|
|
$
|
81,934
|
|
|
$
|
77,131
|
|
|
$
|
74,238
|
|
|
$
|
76,062
|
|
Weighted-average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
30,775
|
|
|
|
30,744
|
|
|
|
33,065
|
|
|
|
36,105
|
|
|
|
35,691
|
|
Diluted
|
|
|
30,890
|
|
|
|
30,744
|
|
|
|
33,315
|
|
|
|
36,484
|
|
|
|
35,944
|
|
Cash dividends paid per share
|
|
$
|
0.68
|
|
|
$
|
0.60
|
|
|
$
|
0.56
|
|
|
$
|
0.54
|
|
|
$
|
0.48
|
|
Common stock market closing prices:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
33.61
|
|
|
$
|
34.09
|
|
|
$
|
39.59
|
|
|
$
|
38.15
|
|
|
$
|
30.93
|
|
Low
|
|
$
|
23.38
|
|
|
$
|
13.44
|
|
|
$
|
24.49
|
|
|
$
|
25.10
|
|
|
$
|
21.09
|
|
Supplemental Information at Year-End
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employees
|
|
|
44,086
|
|
|
|
46,495
|
|
|
|
49,149
|
|
|
|
51,092
|
|
|
|
50,810
|
|
Registered stockholders
|
|
|
22,659
|
|
|
|
23,608
|
|
|
|
24,302
|
|
|
|
30,969
|
|
|
|
32,296
|
|
Market price per share at closing
|
|
$
|
30.93
|
|
|
$
|
24.97
|
|
|
$
|
27.57
|
|
|
$
|
37.12
|
|
|
$
|
28.88
|
|
Book value per share
|
|
$
|
21.01
|
|
|
$
|
19.46
|
|
|
$
|
20.01
|
|
|
$
|
20.07
|
|
|
$
|
19.55
|
|
33
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
Results
of Operations
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. This MD&A contains
forward-looking statements that set forth our expectations and
anticipated results based on managements plans and
assumptions. These statements are often indicated by words such
as expects, anticipates,
believes, estimates, intends
and plans. 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 this Annual Report on
Form 10-K
under the heading Item 1A Risk
Factors. The Securities and Exchange Commission encourages
companies to disclose forward-looking information so that
investors can better understand a companys future
prospects and make informed investment decisions. Please refer
to Part I, Item 1. Business. of this
Form 10-K
for more information regarding forward-looking statements.
As of April 30, 2010, we owned and operated 715
full-service restaurants, including 569 Bob Evans Restaurants in
18 states and 146 Mimis Cafés in 24 states.
Bob Evans Restaurants are primarily located in the Midwest,
mid-Atlantic and Southeast regions of the United States.
Mimis Cafés 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 and a variety of
complementary homestyle convenience food items under the Bob
Evans and Owens brand names. These food products are delivered
to warehouses that distribute to grocery stores throughout the
United States. Revenue in the food products segment is generally
recognized when products are delivered to our customers
warehouses.
References herein to 2011, 2010, 2009 and 2008 refer to fiscal
years. All years presented are 52-week years, except for 2010,
which contained 53 weeks.
General
Overview
The following table reflects data for our fiscal year ended
April 30, 2010, compared to the preceding two fiscal years.
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
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(Dollars in thousands)
|
|
|
Net sales
|
|
$
|
1,726,804
|
|
|
$
|
1,750,512
|
|
|
$
|
1,737,026
|
|
|
$
|
1,411,092
|
|
|
$
|
1,439,090
|
|
|
$
|
1,445,034
|
|
|
$
|
315,712
|
|
|
$
|
311,422
|
|
|
$
|
291,992
|
|
Operating income
|
|
$
|
106,414
|
|
|
$
|
28,367
|
|
|
$
|
107,240
|
|
|
$
|
85,144
|
|
|
$
|
12,796
|
|
|
$
|
78,686
|
|
|
$
|
21,270
|
|
|
$
|
15,571
|
|
|
$
|
28,554
|
|
Cost of sales
|
|
|
29.9
|
%
|
|
|
30.7
|
%
|
|
|
29.8
|
%
|
|
|
24.2
|
%
|
|
|
25.1
|
%
|
|
|
25.5
|
%
|
|
|
55.4
|
%
|
|
|
56.4
|
%
|
|
|
51.0
|
%
|
Operating wages
|
|
|
34.5
|
%
|
|
|
34.1
|
%
|
|
|
34.8
|
%
|
|
|
39.5
|
%
|
|
|
39.2
|
%
|
|
|
39.6
|
%
|
|
|
12.2
|
%
|
|
|
11.1
|
%
|
|
|
11.2
|
%
|
Other operating
|
|
|
16.0
|
%
|
|
|
16.0
|
%
|
|
|
16.2
|
%
|
|
|
18.4
|
%
|
|
|
18.4
|
%
|
|
|
18.4
|
%
|
|
|
5.3
|
%
|
|
|
4.9
|
%
|
|
|
5.4
|
%
|
S,G,&A
|
|
|
8.5
|
%
|
|
|
9.0
|
%
|
|
|
8.6
|
%
|
|
|
6.6
|
%
|
|
|
6.6
|
%
|
|
|
6.3
|
%
|
|
|
17.4
|
%
|
|
|
20.0
|
%
|
|
|
19.9
|
%
|
D&A
|
|
|
4.9
|
%
|
|
|
4.7
|
%
|
|
|
4.4
|
%
|
|
|
5.3
|
%
|
|
|
5.1
|
%
|
|
|
4.8
|
%
|
|
|
3.0
|
%
|
|
|
2.6
|
%
|
|
|
2.7
|
%
|
Impairment
|
|
|
|
|
|
|
3.9
|
%
|
|
|
|
|
|
|
|
|
|
|
4.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
6.2
|
%
|
|
|
1.6
|
%
|
|
|
6.2
|
%
|
|
|
6.0
|
%
|
|
|
0.9
|
%
|
|
|
5.4
|
%
|
|
|
6.7
|
%
|
|
|
5.0
|
%
|
|
|
9.8
|
%
|
The results for fiscal 2010, fiscal 2009 and fiscal 2008 include
the impact of the following:
|
|
|
|
|
Fiscal 2010, fiscal 2009 and fiscal 2008 consolidated and
restaurant segment results included pretax charges of
$6.2 million, $6.4 million and $3.7 million,
respectively, related to fixed asset impairment that is
reflected in selling, general and administrative
(S,G&A) expenses.
|
|
|
|
Fiscal 2010 consolidated and food products segment results
included a $1.4 million pretax gain on the sale of
49 percent of our corporate aircraft, which is reflected as
a reduction of S,G&A.
|
34
|
|
|
|
|
Fiscal 2010 consolidated and restaurant segment results included
$2.5 million in pretax life insurance proceeds, which are
reflected as a reduction of S,G&A.
|
|
|
|
Fiscal 2010 consolidated and food products results included a
pretax charge of $1.0 million related to severance payments
and retirement costs, which is included in S,G&A.
|
|
|
|
Fiscal 2010 results included the positive impact of a
53rd week
of operations, which contributed $6.9 million in operating
income to the consolidated results: $5.7 million in
operating income to the restaurant segment and $1.2 million
in operating income to the food products segment.
|
|
|
|
Fiscal 2010 and fiscal 2009 consolidated and restaurant segment
results included pretax charges of $0.8 million each year
related to severance and retirement, which are reflected in
S,G&A.
|
|
|
|
Fiscal 2009 consolidated and restaurant segment results included
a pretax charge of $68.0 million related to the impairment
of goodwill ($56.2 million) and other intangible assets
($11.8 million) for Mimis, which are reflected on the
Consolidated Statements of Income under Goodwill and other
intangibles impairment.
|
|
|
|
Fiscal 2009 consolidated and food products segment results
included a pretax charge of $0.4 million for unusable spare
parts, which is reflected in other operating
expenses.
|
|
|
|
Fiscal 2009 and fiscal 2008 consolidated and restaurant segment
results included $1.0 million and $2.9 million,
respectively, in pretax gains on the sale of various properties,
which are reflected as a reduction of S,G&A.
|
|
|
|
Fiscal 2009 consolidated and restaurant segment results included
a $0.7 million pretax charge related to a legal settlement,
which is reflected in S,G&A.
|
|
|
|
Fiscal 2008 consolidated and restaurant segment results included
a $6.6 million pretax gain for unredeemed gift certificates
and gift cards (breakage) at Bob Evans Restaurants,
which is included in net sales (see Note A to our
consolidated financial statements).
|
|
|
|
Fiscal 2008 consolidated and restaurant segment results included
a $0.7 million pretax charge related to the settlement of a
dispute with a third party, which is reflected in S,G&A.
|
Restaurant
Segment Overview
The ongoing industry-wide factors most relevant to our
restaurant segment include: the economy, labor and fringe
benefit expenses, commodity prices, energy prices, competition,
same-store sales, consumer acceptance, restaurant openings and
closings, governmental initiatives and regulations, food safety
and weather. The factors that had the greatest positive impact
on our restaurant segment performance in fiscal 2010 were
improved food costs and effective labor management as well as
the impact of a
53rd week
of operations, which contributed $25.8 million and
$5.7 million in net sales and operating income,
respectively. The factor that had the greatest negative impact
was weak same-store sales at Bob Evans Restaurants and
Mimis.
In fiscal 2010, same-store sales decreased 3.5 percent at
Bob Evans Restaurants and decreased 7.2 percent at
Mimis compared to fiscal 2009. We believe same-store sales
at our Bob Evans Restaurants are particularly sensitive to
economic conditions in the Midwest, which has been hit
especially hard by the downturn in the United States
economy, the troubled auto industry, increased unemployment and
lower home values. Nearly 250 Bob Evans Restaurants are located
in Michigan and Ohio where the impact of job losses in the
automotive industry (manufacturers and suppliers) could have a
material adverse effect on our net sales. We believe the
negative same-store sales trend at Mimis reflects the
challenging economic environment in the casual dining sector, as
well as pressures on consumer spending in certain key areas,
particularly in California, Arizona, Florida and Nevada, which
account for approximately 70 percent of Mimis
same-store sales. Same-store sales results include the benefit
of menu price increases, which are outlined later in the
Net Sales section. We remain focused on improving
same-store sales at Bob Evans Restaurants and Mimis in a
challenging economic environment.
35
Reported restaurant segment operating income was
$85.1 million in fiscal 2010 compared to $12.8 million
in fiscal 2009, an increase of $72.3 million. The
restaurant segment operating income increase is mainly a result
of noncash impairment charges during the third quarter of fiscal
2009 that totaled $68.0 million for goodwill and other
intangible assets, as well as the factors listed above. See the
Goodwill and Other Intangibles Impairment section
below.
In fiscal 2009, restaurant segment operating income benefited
from a 40 basis-point improvement as a percentage of net sales
in both cost of sales and operating wages as compared to fiscal
2008. The cost of sales improvement was due largely to effective
supply chain management, lower commodity costs and menu mix
shifts to higher margin items. The operating wages improvement
was due largely to effective use of labor management and
scheduling systems.
Food
Products Segment Overview
The ongoing industry-wide factors most relevant to the 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. The food products
segments profitability was positively impacted by the
lower overall cost structure associated with our conversion from
a direct-store delivery (DSD) distribution model to
a warehouse system that occurred mostly in the fourth quarter of
fiscal 2009. The conversion to a warehouse system resulted in
some severance costs and higher slotting fees in both fiscal
2010 and fiscal 2009. The food products segments fiscal
2010 results were also positively impacted by the effect of the
53rd week
of operations, which resulted in an incremental
$5.5 million and $1.2 million in net sales and
operating income, respectively.
The food products segments net sales increased
1.4 percent in fiscal 2010 compared to fiscal 2009. The
increase in net sales was driven by a 7 percent increase in
pounds sold of comparable products and the additional week of
operations. We define comparable products as principally sausage
and refrigerated side dishes, such as mashed potatoes.
Sow costs represent a significant component of food products
segment cost of sales, and the volatile nature of sow costs
greatly impacts the profitability of the segment. Compared to a
year ago, average sow costs decreased 6.1 percent in fiscal
2010. The decrease in sow costs resulted in a decrease in cost
of sales in the food products segment from 56.4 percent of
net sales in fiscal 2009 to 55.4 percent of net sales in
fiscal 2010.
The food products segment experienced an increase in operating
income of $5.7 million, or 36.6 percent, in fiscal
2010 compared to a year ago, and its operating income margin
increased to 6.7 percent of net sales in fiscal 2010
compared to 5.0 percent of net sales in fiscal 2009. The
improvement was primarily due to the conversion from the DSD
model to a warehouse system, lower sow costs relative to fiscal
2009 and the benefit of a
53rd week
of operations.
In fiscal 2009, the food products segment operating income
decreased $13.0 million, or 45.5 percent, compared to
fiscal 2008 due to an increase in average sow costs of
29.1 percent, offset slightly by improved sow yields. The
food products segments operating income margin decreased
from 9.8 percent of net sales in fiscal 2008 to
5.0 percent of net sales in fiscal 2009.
Net
Sales
Consolidated net sales decreased $23.7 million, or
1.4 percent, in fiscal 2010 compared to fiscal 2009. The
fiscal 2010 decrease was the net result of a $28.0 million
decrease in restaurant segment net sales, partly offset by a
$4.3 million increase in food products segment net sales.
Restaurant segment net sales accounted for 81.7 percent of
total net sales in fiscal 2010, 82.2 percent of total net
sales in fiscal 2009 and 83.2 percent of total net sales in
fiscal 2008. The $28.0 million decline in restaurant net
sales in fiscal 2010 represents a 1.9 percent decrease over
fiscal 2009 net sales, which were 0.4 percent lower
than fiscal 2008 net sales. As noted in the General
Overview section above, the recognition of
$6.6 million in gift certificate and gift card breakage at
Bob Evans Restaurants provided a benefit to net sales in the
third quarter of fiscal 2008. The third quarter of fiscal 2008
was the first quarter in which we had enough historical
information for
36
Bob Evans Restaurants to reasonably determine the breakage
amount for the current and all previous periods (see Note A
to our consolidated financial statements). We have recorded
breakage on a regular basis since the third quarter of fiscal
2008 for Bob Evans Restaurants and in all years presented for
Mimis. We do not expect future breakage amounts to be
material in any particular quarter or year.
The fiscal 2010 decrease in restaurant net sales was the result
of same-store sales declines, partially offset by the impact of
the 53rd
operating week in fiscal 2010 that contributed
$25.8 million of incremental net sales. Same-store sales at
Bob Evans Restaurants decreased 3.5 percent and
0.3 percent in both fiscal 2010 and fiscal 2009,
respectively, and increased 1.8 percent in fiscal 2008. The
same-store sales comparisons for Bob Evans Restaurants included
average menu price increases of 1.9 percent in fiscal 2010,
3.1 percent in fiscal 2009 and 2.5 percent in fiscal
2008. Mimis same-store sales decreased 7.2 percent in
both fiscal 2010 and fiscal 2009 and 2.4 percent in fiscal
2008, including average menu price increases of
2.2 percent, 2.4 percent and 3.2 percent in
fiscal 2010, fiscal 2009 and fiscal 2008, respectively.
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. Net sales of stores to be rebuilt are
excluded for all periods in the same-store sales computation
when construction commences on the replacement building. Net
sales of closed stores are excluded for all periods in the
same-store sales computation.
Carryout net sales represented 8.2 percent of Bob Evans
Restaurant net sales in fiscal 2010 compared to 7.9 percent
and 7.5 percent in fiscal 2009 and fiscal 2008,
respectively. Retail merchandise net sales comprised
1.7 percent of Bob Evans Restaurant net sales in 2010
compared to 2.0 percent and 2.1 percent in fiscal 2009
and fiscal 2008, respectively. Net sales at Mimis
benefited from liquor, beer and wine net sales, which
represented 3.9 percent of net sales in fiscal 2010
compared to 3.8 percent and 3.7 percent in fiscal 2009
and fiscal 2008, respectively. Historically, Mimis alcohol
offerings were limited to beer and wine. We will continue to
include a broader selection of alcoholic beverages in all new
and remodeled Mimis, subject to our ability to obtain the
necessary permits and licenses. At the end of fiscal 2010, 90 of
Mimis stores offered the broader selection of alcoholic
beverages and 56 Mimis stores offered only beer and wine.
Net sales at Mimis also benefited from carryout net sales,
which represented 4.1 percent of net sales,
4.0 percent of net sales and 4.2 percent of net sales
in fiscal 2010, fiscal 2009 and fiscal 2008, respectively.
The net sales impact of lower same-store sales in fiscal 2010
was slightly offset by an increase in the number of operating
locations: 715 restaurants were in operation at the end of
fiscal 2010 compared to 714 in 2009. During fiscal 2010, one
underperforming Bob Evans Restaurant was closed. Mimis
opened two new restaurants in existing markets in fiscal 2010.
The chart below summarizes the restaurant openings and closings
during the last two fiscal years for Bob Evans Restaurants and
Mimis:
Bob Evans Restaurants:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
|
|
Opened
|
|
Closed
|
|
Ending
|
|
Fiscal Year 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
570
|
|
|
|
0
|
|
|
|
1
|
|
|
|
569
|
|
Second Quarter
|
|
|
569
|
|
|
|
0
|
|
|
|
0
|
|
|
|
569
|
|
Third Quarter
|
|
|
569
|
|
|
|
0
|
|
|
|
0
|
|
|
|
569
|
|
Fourth Quarter
|
|
|
569
|
|
|
|
0
|
|
|
|
0
|
|
|
|
569
|
|
Fiscal Year 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
571
|
|
|
|
0
|
|
|
|
0
|
|
|
|
571
|
|
Second Quarter
|
|
|
571
|
|
|
|
0
|
|
|
|
1
|
|
|
|
570
|
|
Third Quarter
|
|
|
570
|
|
|
|
0
|
|
|
|
1
|
|
|
|
569
|
|
Fourth Quarter
|
|
|
569
|
|
|
|
1
|
|
|
|
0
|
|
|
|
570
|
|
37
Mimis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
|
|
Opened
|
|
Closed
|
|
Ending
|
|
Fiscal Year 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
144
|
|
|
|
0
|
|
|
|
0
|
|
|
|
144
|
|
Second Quarter
|
|
|
144
|
|
|
|
1
|
|
|
|
0
|
|
|
|
145
|
|
Third Quarter
|
|
|
145
|
|
|
|
1
|
|
|
|
0
|
|
|
|
146
|
|
Fourth Quarter
|
|
|
146
|
|
|
|
0
|
|
|
|
0
|
|
|
|
146
|
|
Fiscal Year 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
132
|
|
|
|
3
|
|
|
|
0
|
|
|
|
135
|
|
Second Quarter
|
|
|
135
|
|
|
|
4
|
|
|
|
0
|
|
|
|
139
|
|
Third Quarter
|
|
|
139
|
|
|
|
2
|
|
|
|
0
|
|
|
|
141
|
|
Fourth Quarter
|
|
|
141
|
|
|
|
3
|
|
|
|
0
|
|
|
|
144
|
|
Consolidated Restaurants:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
|
|
Opened
|
|
Closed
|
|
Ending
|
|
Fiscal Year 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
714
|
|
|
|
0
|
|
|
|
1
|
|
|
|
713
|
|
Second Quarter
|
|
|
713
|
|
|
|
1
|
|
|
|
0
|
|
|
|
714
|
|
Third Quarter
|
|
|
714
|
|
|
|
1
|
|
|
|
0
|
|
|
|
715
|
|
Fourth Quarter
|
|
|
715
|
|
|
|
0
|
|
|
|
0
|
|
|
|
715
|
|
Fiscal Year 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
703
|
|
|
|
3
|
|
|
|
0
|
|
|
|
706
|
|
Second Quarter
|
|
|
706
|
|
|
|
4
|
|
|
|
1
|
|
|
|
709
|
|
Third Quarter
|
|
|
709
|
|
|
|
2
|
|
|
|
1
|
|
|
|
710
|
|
Fourth Quarter
|
|
|
710
|
|
|
|
4
|
|
|
|
0
|
|
|
|
714
|
|
We continue to update the appearance of our Bob Evans
Restaurants, of which 2 were rebuilt and 15 were remodeled in
fiscal 2010. We also remodeled four Mimis in fiscal 2010.
We believe that the enhanced appearance of the restaurants adds
to our customers experience, which will help same-store
sales and continue to strengthen our restaurant concepts. During
fiscal 2011, we plan to build 3 new, rebuild 2 and remodel 40 to
50 Bob Evans Restaurants. We do not plan to open or rebuild any
Mimis restaurants in fiscal 2011, but plan to remodel
approximately 10 existing restaurants.
Given the same-store sales declines at Bob Evans Restaurants and
the challenging economic environment, a strong product
development pipeline, focused marketing message and customer
value initiatives take on a heightened importance. We are
committed to the ongoing development of new homestyle products
with a Bob Evans twist to help build same-store sales, such as
Breakfast Bowls, Deep-Dish Pastas, Farm-Fresh Wraps and new
Bob-B-Q offerings. We have created a new Fit from the Farm menu.
Additionally, we currently offer more than 30 meals for
$5.99 or less at Bob Evans Restaurants. We have also added two
new incremental layers of net sales at Bob Evans Restaurants.
The first is our catering menu, which we launched in the third
quarter of fiscal 2010, and the second is our family meals,
which feed a family of four. See the BEST Brand
Builders section for further discussion of our sales
initiatives.
Mimis experienced negative same-store sales comparisons in
fiscal 2010 for the third consecutive year. We believe these
results continue to reflect the challenging environment in the
casual dining sector, as well as pressures on consumer spending
in certain key markets, such as California, Arizona, Florida and
Nevada, which currently account for approximately
70 percent of Mimis same-store sales. We are
refocusing our marketing efforts to drive net sales at
Mimis. Our marketing initiatives to drive net sales
include free standing inserts (FSIs) and special
offers through our
e-club,
which has grown its membership from 50,000 members to nearly
500,000 in one year. Online ordering is also now available at
all Mimis, and we have also expanded into catering at
Mimis with our to-go party packs. We are looking at a
variety of other initiatives to help reenergize same-store sales
at Mimis restaurants. See the BEST Brand
Builders section for further discussion of these
initiatives.
38
Food products segment net sales accounted for 18.3 percent,
17.8 percent and 16.8 percent of total net sales in
fiscal 2010, fiscal 2009 and fiscal 2008, respectively. Food
products segment net sales increased $4.3 million, or
1.4 percent, in fiscal 2010 versus fiscal 2009. The fiscal
2010 net sales increase was reflective of a
7.0 percent increase in the volume of comparable products
sold (calculated using the same products in both periods and
excluding newer products) as well as the impact of the
53rd week
of operations, which contributed $5.5 million of
incremental net sales. The impact of the increase in comparable
pounds sold was partially offset by a $9.2 million increase
in promotional discounts provided to retailers in fiscal 2010
versus fiscal 2009, which reduced net sales.
The overall increase in food products segment net sales volume
was driven mostly by our complementary homestyle convenience
items, primarily refrigerated mashed potatoes and macaroni and
cheese, as well as expanded distribution of all products. We
plan to continue our strategy of growing through successful
product introductions and additional points of distribution. We
are also making progress in penetrating supercenter retail
stores, which provides another high-volume net sales channel for
our food products. At the end of fiscal 2010, Bob Evans and
Owens brand products were available for purchase in grocery
stores in 50 states, the District of Columbia, the Toronto,
Canada area and parts of Mexico. The significant increase in
promotional discounts during fiscal 2010 was designed to
increase market share and promote brand awareness. See the
BEST Brand Builders section for further discussion
of new products and distribution.
Food products segment net sales increased $19.4 million, or
6.7 percent, in fiscal 2009 versus fiscal 2008. The fiscal
2009 net sales increase was reflective of a
5.7 percent increase in the volume of comparable products.
The overall increase in food products segment net sales in
fiscal 2009 was driven mostly by our complementary homestyle
convenience items, primarily refrigerated mashed potatoes and
macaroni and cheese, as well as expanded distribution of all
products.
Cost of
Sales
Consolidated cost of sales (cost of materials) was
29.9 percent, 30.7 percent and 29.8 percent of
net sales in fiscal 2010, fiscal 2009 and fiscal 2008,
respectively.
In the restaurant segment, cost of sales (predominantly food
cost) was 24.2 percent, 25.1 percent and
25.5 percent of net sales in fiscal 2010, fiscal 2009 and
fiscal 2008, respectively. The improvement in restaurant segment
cost of sales in both fiscal 2010 and fiscal 2009 was
attributable to lower commodity costs, mix shifts to
higher-margin products and lower costs resulting from effective
supply chain management. See the BEST Brand Builders
section for further discussion of commodity price decreases and
productivity initiatives.
Food products segment cost of sales was 55.4 percent,
56.4 percent and 51.0 percent of net sales in fiscal
2010, fiscal 2009 and fiscal 2008, respectively. These results
were reflective of changing sow costs, which averaged $42.18,
$44.93 and $34.79 per hundredweight in fiscal 2010, fiscal 2009
and fiscal 2008, respectively. The fiscal 2010 sow cost average
represented a 6.1 percent decrease compared to fiscal 2009,
and the fiscal 2009 average represented a 29.1 percent
increase compared to fiscal 2008. The fiscal 2010 decrease in
sow costs was partly offset by deleverage from increased
promotional discounts and a mix-shift from fewer manufactured
items to more co-packed items, which are products we purchase
from third parties for sale under our brand names (e.g. mashed
potatoes, frozen entrees, etc.). Co-packed items have
historically had a higher cost of sales than our manufactured
sausage products. We expect that sow costs will average
approximately $55 to $60 per hundredweight in fiscal 2011, which
will place significant pressure on our operating margins.
The increase in food products segment cost of sales in fiscal
2009 versus fiscal 2008 was primarily due to higher sow costs
described above and a mix shift to more co-packed items versus
manufactured items.
Operating
Wage and Fringe Benefit Expenses
Consolidated operating wage and fringe benefit expenses
(operating wages) were 34.5 percent,
34.1 percent and 34.8 percent of net sales in fiscal
2010, fiscal 2009 and fiscal 2008, respectively. The operating
wages ratio increased in both the restaurant and food products
segments in fiscal 2010 after a decrease in both segments in
fiscal 2009.
39
In the restaurant segment, operating wages were
39.5 percent of net sales in fiscal 2010, compared to
39.2 percent and 39.6 percent in fiscal 2009 and
fiscal 2008, respectively. The fiscal 2010 increase in the
operating wages ratio was due to deleverage from lower
same-store sales at Bob Evans Restaurants and at Mimis,
higher health insurance claims and minimum wage increases
partially offset by lower manager bonuses and labor hours. See
the BEST Brand Builders section for further
discussion of labor management.
In fiscal 2009, the decrease in the restaurant segment operating
wage and fringe benefit expense ratio was due to effective labor
management at both of our restaurant concepts, partially offset
by federal and state minimum wage increases, as well as the
negative leverage due to lower same-store sales at Bob Evans
Restaurants and Mimis.
In the food products segment, operating wages were
12.2 percent, 11.1 percent and 11.2 percent of
net sales in fiscal 2010, fiscal 2009 and fiscal 2008,
respectively. The fiscal 2010 increase in the operating wages
ratio was primarily due to additional expenses associated with
increased production at our Sulphur Springs, Texas,
manufacturing facility and overtime labor hours in an effort to
meet shipment demand for key accounts, particularly in our third
quarter. The improvement in fiscal 2009 versus fiscal 2008 was
due to better leveraging of costs in relation to net sales
volumes discussed in the Net Sales section above.
Other
Operating Expenses
Approximately 94 percent of other operating expenses
(operating expenses) occurred in the restaurant
segment in fiscal 2010, the most significant components of which
were utilities, advertising, restaurant supplies, repair and
maintenance, rent, nonincome based taxes and credit card
processing fees. Consolidated operating expenses were
16.0 percent of net sales in fiscal 2010 and fiscal 2009
and 16.2 percent of net sales in fiscal 2008. Restaurant
segment operating expenses were 18.4 percent of net sales
in fiscal 2010, fiscal 2009 and fiscal 2008. The restaurant
segment other operating expenses for fiscal 2010 compared to
fiscal 2009 were stable as the deleverage impact from lower
same-store sales was offset by lower utilities and preopening
expenses. The notable fluctuations within the restaurant segment
operating expenses for fiscal 2009 compared to fiscal 2008 were
decreases in advertising expenses and preopening costs offset by
higher utility and occupancy costs.
Food products segment other operating expenses as a percent of
net sales in fiscal 2010, fiscal 2009 and fiscal 2008 were
5.3 percent, 4.9 percent and 5.4 percent,
respectively. The increase in the operating expense ratio in
fiscal 2010 compared to fiscal 2009 was due to additional
expenses associated with the expansion of our Sulphur Springs,
Texas, manufacturing facility, as well as deleverage from
increased promotional discounts. The decrease in the operating
expenses ratio in fiscal 2009 compared to fiscal 2008 was
primarily due to lower liability insurance costs. The fiscal
2009 operating expense included the $0.4 million noncash
charge for unusable spare parts.
Selling,
General and Administrative Expenses
The most significant components of S,G&A expenses are wages
and fringe benefits, food products advertising expense, food
products transportation costs, gains/losses on asset sales and
fixed asset impairment charges. Consolidated S,G&A expenses
represented 8.5 percent, 9.0 percent and
8.6 percent of net sales in fiscal 2010, fiscal 2009 and
fiscal 2008, respectively.
In fiscal 2010, S,G&A was negatively impacted by charges of
$6.2 million related to fixed asset impairments for four
underperforming Bob Evans Restaurants and 22 other properties,
as well as $1.8 million related to severance payments and
retirement costs. Pretax gains of $2.5 million and
$1.4 million related to proceeds from corporate-owned life
insurance policies and gains on asset sales, respectively,
partly offset these charges.
In fiscal 2009, S,G&A was impacted by charges of
$6.4 million related to fixed asset impairments for six
underperforming Mimis Cafés, $0.7 million
related to a legal settlement and $0.8 million related to
severance payments and retirement costs. A pretax gain of
$1.0 million related to the sale of real estate assets
partially offset these charges in fiscal 2009.
The fiscal 2010 S,G&A results benefited from converting the
food products segment to a more efficient warehouse distribution
system and the $1.4 million in pretax gain on the sale of
49 percent of our corporate aircraft, which more than offset the
negative leverage from declining same-store sales in the
restaurant segment.
40
Depreciation
and Amortization
Depreciation and Amortization (D&A) was
4.9 percent, 4.7 percent and 4.4 percent of
consolidated net sales in fiscal 2010, fiscal 2009 and fiscal
2008, respectively. Restaurant segment D&A was
5.3 percent, 5.1 percent and 4.8 percent of
restaurant net sales in fiscal 2010, fiscal 2009 and fiscal
2008, respectively. The fiscal 2010 increase as a percentage of
restaurant net sales is primarily due to the fiscal 2010 capital
expenditures and declining restaurant net sales. Food products
segment D&A was 3.0 percent, 2.6 percent and
2.7 percent of food products net sales in fiscal 2010,
fiscal 2009 and fiscal 2008, respectively. The fiscal 2010
increase as a percentage of food product net sales is due to the
fiscal 2010 capital expenditures, primarily for a 50,000-square
foot expansion at our plant in Sulphur Springs, Texas, and
relatively stable food products net sales.
Goodwill
and Other Intangibles Impairment
We are required for accounting purposes to assess the carrying
value of our goodwill and other intangible assets annually or
whenever circumstances indicate that a decline in value may have
occurred. Based on our consolidated stock valuation relative to
our book value, a scaled-back Mimis development plan and
continued declining same-store sales at Mimis, we
determined that indicators of potential impairment were present
during the third quarter of fiscal 2009. As a result, we
performed interim impairment tests of goodwill and intangible
assets with indefinite lives.
The result of our impairment test in fiscal 2009 of the
unamortized Mimis business trade name asset indicated that
the asset had a fair value of $34.0 million, compared to
its carrying value of $45.8 million. This resulted in a
pretax impairment charge related to the business trade name of
$11.8 million in the restaurant segment in the third
quarter of fiscal 2009. The fair value of the business trade
name was estimated using the relief-from-royalty method, an
income approach to valuation.
We also performed an interim test in fiscal 2009 to determine if
the carrying amount of goodwill was impaired. The results
indicated that the carrying value of Mimis goodwill of
$56.2 million was fully impaired. Therefore, we recorded a
pretax goodwill impairment charge in the restaurant segment in
the third quarter of fiscal 2009 for the entire
$56.2 million. The fair value of the Mimis reporting
unit was estimated based on a discounted cash flow model using
our business plans and projections for Mimis as the basis
for expected future cash flows. We believe the assumptions used
for the impairment test are consistent with those that a market
participant would use.
We also reviewed the Mimis restaurant concept asset for
impairment in the third quarter of fiscal 2009. This asset is
being amortized over a
15-year
life. The estimated fair value of the restaurant concept,
calculated using a relief-from-royalty method, exceeded its
carrying value and therefore, no impairment charge was recorded
related to this asset.
There were no goodwill and other intangibles impairment charges
in fiscal 2010 or fiscal 2008.
Interest
Net interest expense for fiscal 2010, fiscal 2009 and fiscal
2008, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(Dollars in thousands)
|
|
|
Gross interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed-rate debt
|
|
$
|
10,406
|
|
|
$
|
10,601
|
|
|
$
|
8,799
|
|
Variable-rate debt
|
|
|
531
|
|
|
|
2,777
|
|
|
|
4,232
|
|
Capitalized interest
|
|
|
(836
|
)
|
|
|
(933
|
)
|
|
|
(1,325
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,101
|
|
|
|
12,445
|
|
|
|
11,706
|
|
Gross interest income
|
|
|
(13
|
)
|
|
|
(139
|
)
|
|
|
(716
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest expense
|
|
$
|
10,088
|
|
|
$
|
12,306
|
|
|
$
|
10,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The decrease in net interest expense in fiscal 2010 was
primarily the result of lower average borrowings in fiscal 2010
as compared to fiscal 2009. We reduced our total debt by
$79.9 million during fiscal 2010. The increase
41
in net interest expense in fiscal 2009 was the result of
additional debt incurred primarily to fund our share repurchase
program.
At April 30, 2010, our outstanding debt included
$14.0 million on our variable-rate revolving lines of
credit and $176.2 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 percent
increase in the benchmark rate used for our revolving lines of
credit would increase our annual interest expense by
$0.1 million, assuming the $14.0 million outstanding
at April 30, 2010, was outstanding for the entire year.
Taxes
The effective federal and state income tax rates were
27.0 percent, 29.4 percent (excluding the
nondeductible goodwill impairment charge, discussed earlier) and
32.6 percent in fiscal 2010, fiscal 2009 and fiscal 2008,
respectively. The decrease in fiscal 2010 is primarily due to
the impacts of settlements with certain state taxing
authorities, an increase in the cash surrender value of company
owned life insurance policies and life insurance proceeds
received. The decrease in fiscal 2009 is primarily due to the
impact of federal tax credits, mainly work-opportunity and FICA
tip credits, which have remained relatively consistent with
prior periods despite the decrease in pretax income. The fiscal
2009 effective tax rates also benefited from the impact of
settlements with certain state taxing authorities.
In fiscal 2008, we adopted the Income Taxes Topic of the
Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC), which
provides guidance for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a
tax return and provides guidance on derecognition,
classification, interest and penalties, accounting in interim
periods, disclosure and transition. The adoption of the Income
Taxes Topic of the FASB ASC resulted in a cumulative effect
adjustment of $0.2 million for unrecognized tax benefits
recorded as a reduction to the opening balance of retained
earnings in fiscal 2008.
Liquidity
and Capital Resources
Cash generated from both the restaurant and food products
segments were used as the main source of funds for working
capital, capital expenditures, debt repayments and share
repurchases in fiscal 2010. Cash and equivalents totaled
$17.8 million at April 30, 2010.
In the second quarter of fiscal 2009, we completed a private
placement of $70 million in senior unsecured fixed-rated
notes. These notes were issued in two series. The
$40 million Series A senior notes bear interest at
6.39 percent and mature on July 28, 2014, with a
mandatory prepayment of $20 million due on July 28,
2012. The $30 million Series B senior notes bear
interest at 6.39 percent and mature on July 28, 2013.
The net proceeds from the notes we issued in fiscal 2009 were
used to repay outstanding debt under existing bank credit
facilities and to repay a portion of our outstanding senior
notes issued in fiscal 2004.
Bank lines of credit were increased to $180.0 million in
December 2007 as a temporary measure to provide additional
credit until the $70.0 million private placement of notes
was completed. With the completion of the private placement in
the second quarter of fiscal 2009, the bank lines of credit were
reduced in the third quarter of fiscal 2009 to
$165.0 million and again in fiscal 2010 to
$120.0 million. At April 30, 2010, and April 24,
2009, $14.0 million and $67.0 million, respectively,
were outstanding on these lines of credit. At April 30,
2010, our bank lines of credit total $120.0 million, of
which $10.1 million is reserved for certain standby
letters-of-credit.
The remaining $109.9 million of our bank lines of credit is
available for liquidity needs, capital expansion and repurchases
of our common stock.
In fiscal 2010, we repurchased 0.7 million shares of our
outstanding common stock under our share repurchase program at a
total cost of $21.1 million. In fiscal 2009, we repurchased
0.2 million shares of our outstanding common stock under
our share repurchase program at a total cost of
$5.4 million. In fiscal 2008, we repurchased
5.0 million shares of our outstanding common stock under
our share repurchase program at a total cost of
$154.6 million. Additionally, dividend payments totaled
$20.9 million in 2010, $18.4 million in fiscal 2009
and $18.7 million in fiscal 2008.
42
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 $51.3 million in fiscal 2010 compared to
$96.0 million in fiscal 2009. The decrease in capital
spending in fiscal 2010 versus fiscal 2009 was due to the
decrease in Bob Evans and Mimis new restaurant openings
because of restaurant level economics that have not met our
return-on-investment
targets. We do not intend to substantially increase the
construction of new restaurants until we improve restaurant
level economics by increasing our net sales, lowering our labor,
purchasing and construction costs, and increasing our margins
and profitability. For fiscal 2010, we did not open any new Bob
Evans Restaurants (as compared to 1 in fiscal 2009 and 2 in
fiscal 2008), and we decreased the number of 2010 Mimis
openings to 2 new locations (as compared to 12 in fiscal 2009
and 17 in fiscal 2008).
We expect our capital expenditures for fiscal 2011 to
approximate $65 to $70 million. In fiscal 2011, we plan to
build 3 new Bob Evans Restaurants. We also plan to rebuild 2 and
remodel 40 to 50 existing Bob Evans Restaurants. We do not plan
to open or rebuild any Mimis, but we plan to remodel
approximately 10 existing locations.
Future payments of our contractual obligations and outstanding
indebtedness as of April 30, 2010, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
1 Year
|
|
|
|
|
|
After
|
Contractual Obligations(1)
|
|
Total
|
|
and Less
|
|
2-3 Years
|
|
4-5 Years
|
|
5 Years
|
|
|
(In thousands)
|
|
Operating leases
|
|
$
|
308,146
|
|
|
$
|
24,163
|
|
|
$
|
46,674
|
|
|
$
|
43,418
|
|
|
$
|
193,891
|
|
Long-term debt(2)
|
|
$
|
186,535
|
|
|
$
|
30,013
|
|
|
$
|
57,199
|
|
|
$
|
89,134
|
|
|
$
|
10,189
|
|
Purchase obligations
|
|
$
|
47,038
|
|
|
$
|
47,038
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Other liabilities(3)
|
|
$
|
99
|
|
|
$
|
99
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
(1) |
|
The provisions of our deferred compensation plans do not provide
for specific payment dates. Therefore, our obligations under
these plans were excluded from this table. Our deferred
compensation obligations of $26.4 million were included in
the Consolidated Balance Sheets at April 30, 2010, as part
of long-term liabilities. |
|
(2) |
|
Amounts include interest, which is at fixed rates as outlined in
Note B of our consolidated financial statements. |
|
(3) |
|
Other liabilities includes those future estimated payments
associated with unrecognized tax liabilities under the Income
Taxes Topic of the FASB ASC for which we were able to make
reasonably reliable estimates of the future demands on liquidity. |
We believe that funds needed for capital expenditures, working
capital and share repurchases during fiscal 2011 will be
generated from operations and from available bank lines of
credit. We will evaluate additional financing alternatives as
warranted. At the end of fiscal 2010, we also had
$10.6 million in standby
letters-of-credit
for self-insurance plans.
At April 30, 2010, we had contractual commitments for
restaurant construction, plant equipment additions and the
purchases of land and inventory of approximately
$47.0 million. D&A expenses in fiscal 2011 are
expected to approximate $85.0 million to $87.0 million.
The amounts of other contingent commercial commitments by
expiration period as of April 30, 2010, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Commitment Expiration per Period
|
|
|
Total Amounts
|
|
1 Year
|
|
2-3
|
|
4-5
|
|
After 5
|
Other Commercial Commitments
|
|
Committed
|
|
and Less
|
|
Years
|
|
Years
|
|
Years
|
|
|
(In thousands)
|
|
Standby
letters-of-credit
|
|
$
|
10,649
|
|
|
$
|
10,649
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Lines of credit
|
|
|
14,000
|
|
|
|
14,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial commitments
|
|
$
|
24,649
|
|
|
$
|
24,649
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
43
BEST
Brand Builders
In fiscal 2010, 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 net 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 that our entire team must work
together in a spirit of collaboration. We must communicate
openly and share ideas and BEST practices with one another. One
significant project that helps us win together as a team is
Project BEST Way, which we introduced in fiscal 2007. The goal
of this program is to achieve efficiencies and productivities in
all business units. This is being accomplished through a variety
of initiatives, including strategic menu pricing, new labor
forecasting and scheduling systems coupled with our
actual-versus-theoretical food cost program at Bob Evans
Restaurants and Mimis and manufacturing productivity
initiatives in our plants. We continue to benefit from the
consolidated purchasing efforts of our supply chain department
and have seen success with purchasing initiatives that allowed
us to make improvements in our operating income, particularly
cost of sales.
Another example of winning together as a team is the One
BEST Way initiative (OBW). OBW represents
standardization of processes and procedures across both
restaurant concepts, as well as identifying additional
opportunities for purchasing synergies by consolidating vendors
and purchased items.
We have also made significant changes to our food products
business this past year to meet the changing needs of the
marketplace and our customers. We moved from the DSD model to
warehouse distribution. The conversion to the warehouse model
has allowed us to develop national account teams for our major
customers.
In June 2009, we completed an approximately $16.0 million,
50,000-square foot expansion at our plant in Sulphur Springs,
Texas. This expansion has nearly doubled our square footage in
Sulphur Springs, where we produce convenience food products such
as breakfast sandwiches, fully cooked sausage and breakfast
tacos for Bob Evans and Owens. The Sulphur Springs expansion has
offered us opportunities to look for efficiencies at our
Richardson, Texas, plant and to think about the best way to
manage these production facilities as a group. As part of that
review, we realigned the operations team to ensure we have the
best level of support for our manufacturing plants and to
support manufacturing productivity initiatives. We believe these
changes have positioned our restaurant and food products
businesses to help meet future growth plans.
The second Brand Builder is to consistently drive net sales
growth. Our highest priority in the restaurant segment is to
increase same-store sales. Bob Evans Restaurants experienced a
decrease in same-store sales of 3.5 percent in fiscal 2010.
We believe same-store sales at our Bob Evans Restaurants are
particularly sensitive to economic conditions in the Midwest,
which has been hit particularly hard by the downturn in the
United States economy, increased unemployment and lower
home values. New product development and a focused marketing
message take on a heightened importance due to these same-store
sales challenges, which we expect to continue throughout the
year. We continue to concentrate on customer value initiatives
along with product development and innovation. We currently
offer more than 30 meals for $5.99 or less at Bob Evans
Restaurants. We have created a new Fit from the Farm menu, which
provides guests who are following a 2,000 calorie daily diet
with the option of eating three balanced meals a day at Bob
Evans Restaurants. We have also added two new incremental layers
of sales at Bob Evans Restaurants. The first is our catering
menu, which we launched in the third quarter of fiscal 2010, and
the second is our family-size meals for carryout, which we
started to promote in the third quarter of fiscal 2010.
At Mimis, we experienced a decrease in same-store sales of
7.2 percent in fiscal 2010. At Mimis, the sales
building programs are being driven by our Power of
10 strategy which demonstrates the upside to our sales if
we can achieve a 10 percent net sales mix in each of the
categories of carryout, alcoholic beverage net sales, appetizers
and desserts. Currently we are well below 10 percent in
each of these categories with approximately 2 percent of
our
44
net sales in desserts, approximately 3 percent of our net
sales in appetizers and approximately 4 percent of our net
sales in both carryout and alcoholic beverages. During fiscal
2010, we introduced a three-course, fixed price dinner menu
designed to drive traffic. For $12.99, guests get their choice
of a starter, Just Enough entrée and a Petite Treat
dessert. Additionally, we are refocusing our marketing efforts
towards digital marketing and social networking. Our marketing
initiatives to drive sales include FSIs and special offers
through our
e-club.
Online ordering is also now available at all Mimis, along
with expansion into catering with our to-go party packs.
Bob Evans Restaurants and Mimis are focused on growing
restaurant level net sales by developing our employees with a
capability to drive net sales culture while
maintaining guest satisfaction.
In our food products segment, our net sales focus is on
increasing comparable pounds sold and gaining additional points
of distribution. We experienced an increase of 7 percent in
comparable pounds sold in fiscal 2010, due in part to gaining
additional points of distribution and more authorizations for
sausage products and side dishes. The impact of the increase in
comparable pounds sold in fiscal 2010 was offset by a
significant increase in promotional discounts provided to
retailers, which reduce net sales. The increase in promotional
discounts was designed to increase market share and promote
brand awareness. We believe our conversion from the DSD model to
a warehouse system will allow us to drive net sales more
profitably by directing our strategies at the customer account
level rather than an individual store level. We also expect to
gain net sales with the introduction of new retail products,
including our Wrappers and Stuffers. At the end of fiscal 2010,
Bob Evans and Owens brand products were 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 eliminated approximately 3 million
labor hours from our restaurant segment during fiscal 2010 on a
52-week comparable basis. 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 in 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 is now complete.
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 Technologies, a third party firm, which monitors the
customer experience.
Food products operating income increased to
6.7 percent in fiscal 2010 from 5.0 percent in fiscal
2009. The increase is primarily due to the conversion from the
DSD model to a warehouse system, which resulted in a lower
overall cost structure. The savings realized from the lower
overall warehouse cost structure was offset by a significant
increase in promotional discounts provided to retailers, which
reduce net sales.
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, reducing Bob Evans Restaurant hourly
turnover to about 70 percent in fiscal 2010 and Mimis
hourly turnover to about 84 percent in fiscal 2010.
Operations excellence is also our commitment to build people
capability and deliver speed with hospitality. In our food
products segment, the operational focus will be to gain process
efficiencies through manufacturing productivity initiatives.
Our fifth and final Brand Builder is to increase returns on
invested capital. As previously stated, we are not going to open
large numbers of new Bob Evans Restaurants and Mimis until
projected returns improve. Instead we will be focusing on
improving existing store profitability at both restaurant
concepts. At Bob Evans Restaurants in fiscal 2011, we expect to
build three new restaurants, rebuild two restaurants and remodel
40 to 50 restaurants. We
45
do not expect to open or rebuild any Mimis, but plan to
remodel approximately 10 existing locations 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 reimaged a Mimis in Chandler, Arizona, in
fiscal 2010 with an upscale bar presentation in conjunction with
a wider liquor selection, a bakery items 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.
As noted earlier, in the first quarter of fiscal 2010 we
completed an approximately $16.0 million expansion at our
Sulphur Springs, Texas, plant, which produces fully-cooked
convenience items.
In the third quarter of fiscal 2010, we increased our quarterly
cash dividend to $0.18 from $0.16. Despite the challenges we are
facing, we are confident in our overall financial position,
which enabled us to implement this dividend increase. Finally,
we repurchased 732,000 shares under our stock repurchase
program in fiscal 2010.
From February 24, 2009, through October 23, 2009, and
subject to the exceptions set forth below, we were prohibited
from declaring, making or incurring any liability to declare or
make any Restricted Payments (as defined in the note agreements
discussed in Note B), including: (1) dividends or
other distributions or payments on our capital stock or other
equity interests; (2) the redemption or acquisition of our
capital stock or other equity interests or of warrants, rights
or other options to purchase such stock or other equity
interests (except when made solely in exchange for such stock or
other equity interests or contemporaneously from the net
proceeds of a sale of such stock or other equity interests); and
(3) any repayment, redemption, repurchase or other
acquisition of the principal of any Subordinated Debt (as
defined in the note agreements) prior to the regularly scheduled
maturity date thereof; provided, however, that the foregoing
restrictions did not apply to: (a) dividends paid on our
common stock on a pro rata basis in the ordinary course of
business to all holders of common stock not to exceed $0.16 per
share per fiscal quarter; (b) distributions made pursuant
to employment agreements, dividend reinvestment and stock
purchase plans, stock option or equity plans or other benefit
plans generally consistent with past practices; or
(c) distributions made in connection with the exercise of
stock options or the vesting of equity awards for management or
employees.
In summary, we remain focused on the five BEST Brand Builders
and continue to implement them with a sense of urgency.
Business
Outlook
We are expecting fiscal 2011 operating income to be
approximately $105 to $110 million, taking into account
ongoing challenging macroeconomic conditions, the loss of an
extra operating week compared to fiscal 2010 and significantly
higher sow costs. The 53rd operating week contributed an
incremental $31.3 million in net sales and
$6.9 million in operating income to our fiscal 2010
results. We estimate that our sow costs will be in the range of
$55 to $60 per hundredweight in fiscal 2011 compared to $42 in
fiscal 2010.
The fiscal 2011 outlook relies on a number of important
assumptions. We anticipate overall net sales to remain
relatively flat in fiscal 2011 at about $1.7 billion. In
the restaurant segment, we anticipate negative same-store sales
of approximately 2.0 percent to flat at Bob Evans
Restaurants and negative same-store sales of approximately
5.0 percent to negative 2.0 percent at Mimis. We
expect 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 to $985 million at Bob Evans
Restaurants and $380 to $395 million at Mimis. The
restaurant segment operating income margins are expected to be
approximately 6 to 7 percent for fiscal 2011. 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.
46
In the food products segment, we expect continued growth in
pounds sold and expanded retail distribution, with overall net
sales of $330 to $360 million, which includes price
increase initiatives to be implemented early in the second
quarter. We anticipate that sow costs will average approximately
$55 to $60 per hundredweight in fiscal 2011. We also expect
operating income margins in the food products segment of
approximately 4.5 to 6 percent, but significantly lower
(near breakeven) in the first quarter and improving the
remainder of the fiscal 2011 as price increases and cost savings
related to manufacturing productivity initiatives get traction.
We project net interest expense of approximately $9 to
$10 million in fiscal 2011.
The effective tax rate is estimated to be approximately
34 percent for fiscal 2011, which is more representative of
our historical average. The average diluted shares outstanding
for 2011 are expected to be approximately 31 million for
the year.
Capital spending for fiscal 2011 is expected in a range of $65
to $70 million, an increase 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 3 new stores and plan to rebuild 2 and remodel 40 to 50
existing restaurants in fiscal 2011. At Mimis, we do not
plan to open or rebuild any restaurants, but plan to remodel
approximately 10 existing stores in fiscal 2011. Depreciation
and amortization expense for fiscal 2011 should approximate $85
to $87 million.
The Board of Directors has authorized a $25 million share
repurchase program in fiscal 2011.
Critical
Accounting Policies
Our accounting policies are more fully described in Note A
of the consolidated financial statements. As discussed in
Note A, the consolidated financial statements are prepared
in accordance with accounting principles generally accepted in
the United States, which require us to make estimates and
assumptions that affect the amounts reported. Actual results
could differ materially from those estimates. We believe that
the following discussion addresses our most significant
accounting policies, and the following significant accounting
policies may involve a higher degree of judgment and complexity.
We are required to perform annual impairment tests of our
goodwill and intangible assets (or more frequently if events or
changes in circumstances indicate the asset might be impaired).
We have elected to test for impairment in the fourth quarter of
each fiscal year. The goodwill impairment test is a two-step
process that requires management to make judgments in
determining what assumptions to use in the calculation. The
first step of the process consists of estimating the fair value
of each reporting unit (in this case, Mimis) based on a
discounted cash flow analysis or other appropriate models using
revenue and profit forecasts and comparing that estimated fair
value with the carrying value of the reporting unit, which
includes goodwill. Factors used in the impairment tests include,
but are not limited to, our plans for new store development,
same-store sales trends, future operations, brand initiatives,
recent operating results and projected net sales and cash flows.
If the estimated fair value of the reporting unit is less than
the carrying value, a second step is performed to compute the
amount of goodwill impairment by determining an implied
fair value of goodwill. The determination of a reporting
units implied fair value of goodwill requires
us to allocate the estimated fair value of the reporting unit to
the assets and liabilities of the reporting unit. Any
unallocated fair value represents the implied fair
value of goodwill, which is compared to its corresponding
carrying value.
Based on our consolidated stock valuation relative to our book
value, a scaled-back development plan and continued declining
same-store sales at Mimis, we determined that indicators
of potential impairment were present during the third quarter of
fiscal 2009. During the third quarter of fiscal 2009, we
performed interim impairment tests of goodwill and intangible
assets with indefinite lives and recorded impairment charges of
$56.2 million and $11.8 million for goodwill and other
intangible assets, respectively. The fiscal 2009 charges are
reflected on the Consolidated Statements of Income under
Goodwill and other intangibles impairment.
We are self-insured for most casualty losses and employee
health-care claims up to certain stop-loss limits per claim. We
record our best estimate of the cost to settle incurred
self-insured casualty losses and employee health-care claims.
The recorded liability includes estimated reserves for both
reported claims and incurred, but not reported claims. Casualty
loss estimates are based on the results of independent actuarial
studies and consider
47
historical claim frequency and severity, as well as changes in
factors such as business environment, benefit levels, medical
costs and the regulatory environment that could impact overall
self-insurance costs. The employee health-care claims reserve
estimate is based on our review of our historical claims paid
and the historical time lag between when the claims are incurred
and when the claims are paid. We review the time lag
periodically throughout the fiscal year. Additionally, a risk
margin to cover adverse development that may occur over the
several years it takes for claims to settle is included in
reserves, which increases our confidence level that the recorded
reserve is adequate. Because there are many estimates and
assumptions involved in recording insurance liabilities,
differences between actual future events and prior estimates and
assumptions could result in adjustments to these liabilities.
However, we believe that our calculation of insurance
liabilities would not change materially under different
conditions
and/or
different methods. Historically, we have been adequately
reserved for self- insured losses and the estimated reserves
have proven to be sufficient for actual claims settled. See
Note F for a further discussion of our insurance programs.
Property, plant and equipment comprise 87 percent of our
assets. Depreciation is recognized using the straight-line and
accelerated methods in amounts adequate to amortize costs over
the estimated useful lives of depreciable assets (see
Note A). We estimate useful lives on buildings and
equipment based on historical data and industry norms. Changes
in estimated useful lives could have a significant impact on
earnings. Additionally, testing for impairment of long-lived
assets, which we perform at the individual store level in our
restaurant segment, requires significant management judgment
regarding future cash flows, asset lives and discount rates.
Changes in estimates could result in future impairment charges.
Pretax charges of $6.2 million, $6.4 million and
$3.7 million were recognized in fiscal 2010, fiscal 2009
and fiscal 2008, respectively, related to fixed asset impairment.
We measure the cost of employee services received in exchange
for an equity award, such as stock options or restricted stock
awards, based on the fair value of the award on the grant date.
The cost is recognized in the income statement over the vesting
period of the award on a straight-line basis. Awards to
retirement-eligible employees are subject to immediate expensing
in full upon grant. The fair value of each option award in
fiscal 2010, fiscal 2009 and fiscal 2008 was estimated on the
date of grant using the Black-Scholes option-pricing model. The
expected term of options granted is based on the historical
exercise behavior of full-term options, and the expected
volatility is based on the historical volatility of our common
stock. The risk-free rate is based on the U.S. Treasury
zero-coupon yield curve in effect at the time of grant. Both
expected volatility and the risk-free rate are based on a period
commensurate with the expected option term. The expected
dividend yield is based on the current dividend, the current
market price of our common stock and historical dividend yields.
We estimate certain components of our provision for income
taxes. These estimates include, among other items, effective
rates for state and local income taxes, allowable tax credits
for items such as taxes paid on reported tip income, estimates
related to D&A expense allowable for tax purposes and the
tax deductibility of certain other items. The estimates are
based on the best available information at the time that we
prepare the tax provision. We generally file our annual income
tax returns several months after our fiscal year-end. Income tax
returns are subject to audit by federal, state and local
governments, generally years after the returns are filed. These
returns could be subject to material adjustments or differing
interpretations of the tax laws. In fiscal 2008, we adopted the
Income Taxes Topic of the FASB ASC, which provides guidance for
the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. At the
end of fiscal 2010, we have reserved $9.1 million related
to unrecognized tax benefits. It is reasonably possible that the
amount of unrecognized tax benefits may increase or decrease
within the next year.
While our recognition of revenue does not generally involve
significant judgment, the accounting for unredeemed gift
certificates and gift cards requires estimation. We issue gift
cards (and prior to fiscal 2006, issued gift certificates;
collectively, gift cards) which contain no
expiration dates or inactivity fees. We recognize revenue from
gift cards when they are redeemed by the customer. In addition,
we recognize income on unredeemed gift cards
(breakage) when the likelihood of redemption is
remote and there is no legal obligation to remit the unredeemed
gift cards to state governments. We determine the gift card
breakage rate based on historical redemption patterns. Fiscal
2008 was the first year in which we recognized gift card
breakage income for Bob Evans Restaurants, as that was the first
time we had sufficient historical information to reasonably
determine the breakage rate. As a result, $6.6 million of
pretax income was recorded in the third quarter of fiscal 2008,
which included gift card breakage income related to gift cards
sold since the inception of our gift card programs.
48
From time to time in the normal course of business, we are
subject to proceedings, lawsuits and other claims. We assess the
potential liabilities related to any lawsuits or claims brought
against us. While it is typically very difficult to determine
the timing and ultimate outcome of these actions, we use our
best judgment to determine if it is probable that we will incur
an expense related to the settlement or final adjudication of
such matters and whether a reasonable estimation of such
probable loss, if any, can be made. Given the inherent
uncertainty related to the eventual outcome of litigation, it is
possible that all or some of these matters may be resolved for
amounts materially different from any provisions that we may
have made with respect to their resolution.
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
As noted in Note A, Summary of Significant Accounting
Policies, to our consolidated financial statements which
are included in Item 8 of this Annual Report on
Form 10-K,
we do not 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 April 30, 2010, our outstanding debt included
$14.0 million on our variable-rate revolving lines of
credit and $176.2 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 percent
increase in the benchmark rate used for our revolving lines of
credit would increase our annual interest expense by
$0.1 million, assuming the $14.0 million outstanding
at April 30, 2010, was outstanding for the entire year.
We purchase certain commodities such as beef, pork, poultry,
seafood, produce and dairy. 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
any commodity price aberrations are generally short-term in
nature.
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
Managements
Report on Internal Control Over Financial Reporting
To the Stockholders of Bob Evans Farms, Inc.:
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting to provide
reasonable assurance regarding the reliability of our financial
reporting and the preparation of financial statements for
external purposes in accordance with accounting principles
generally accepted in the United States. Internal control over
financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that in
reasonable detail accurately and fairly reflect the transactions
and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in accordance with
generally accepted accounting principles and that receipts and
expenditures of the company are being made only in accordance
with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention
or timely detection of the unauthorized acquisition, use or
disposition of our assets that could have a material effect on
the financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Accordingly, even an effective system of internal control over
financial reporting will provide only reasonable assurance with
respect to the reliability of financial reporting and financial
statement preparation.
With our supervision, management assessed our internal control
over financial reporting as of April 30, 2010, the end of
our fiscal year. Management based its assessment on criteria
established in Internal Control Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Managements assessment included the
evaluation of such elements as the design and operating
effectiveness of key financial
49
reporting controls, process documentation, accounting policies
and our overall control environment. This assessment is
supported by testing and monitoring performed by our internal
audit function.
Based on its assessment, management has concluded that our
internal control over financial reporting was effective as of
the end of the fiscal year to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external reporting
purposes in accordance with accounting principles generally
accepted in the United States.
We reviewed the results of managements assessment with the
Audit Committee of our Board of Directors. Additionally, our
independent registered public accounting firm, Ernst &
Young LLP, independently assessed our internal control over
financial reporting. Ernst & Young has issued a report
on our internal control over financial reporting, which is
included in this annual report.
|
|
|
/s/ Steven
A. Davis
|
|
/s/ Tod
P. Spornhauer
|
Steven A. Davis
|
|
Tod P. Spornhauer
|
Chief Executive Officer
|
|
Chief Financial Officer
|
50
Report
of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Bob Evans Farms,
Inc.:
We have audited Bob Evans Farms, Inc.s internal control
over financial reporting as of April 30, 2010, based on
criteria established in Internal Control Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (the COSO criteria). Bob
Evans Farms, Inc.s management is responsible for
maintaining effective internal control over financial reporting,
and for its assessment of the effectiveness of internal control
over financial reporting included in the accompanying
Managements Report on Internal Control over Financial
Reporting. Our responsibility is to express an opinion on the
companys internal control over financial reporting based
on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, Bob Evans Farms, Inc. maintained, in all
material respects, effective internal control over financial
reporting as of April 30, 2010, based on the COSO criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
fiscal 2010 consolidated financial statements of Bob Evans
Farms, Inc. and our report dated June 28, 2010, expressed an
unqualified opinion thereon.
Columbus, Ohio
June 28, 2010
51
Report of
Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Bob Evans Farms,
Inc.:
We have audited the accompanying consolidated balance sheets of
Bob Evans Farms, Inc. and subsidiaries as of April 30,
2010, and April 24, 2009, and the related consolidated
statements of income, stockholders equity and cash flows
for each of the three years in the period ended April 30,
2010. These financial statements are the responsibility of the
companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Bob Evans Farms, Inc. and subsidiaries at
April 30, 2010, and April 24, 2009, and the
consolidated results of their operations and their cash flows
for each of the three years in the period ended April 30,
2010, in conformity with U.S. generally accepted accounting
principles.
As discussed in Note C to the consolidated financial
statements, in fiscal 2008 the company adopted Income Taxes
Topic of the FASB ASC, as it relates to accounting for uncertain
tax positions.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), Bob
Evans Farms, Inc.s internal control over financial
reporting as of April 30, 2010, based on criteria
established in Internal Control Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated June 28, 2010,
expressed an unqualified opinion thereon.
Columbus, Ohio
June 28, 2010
52
Bob Evans
Farms, Inc. and Subsidiaries
Consolidated
Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
April 30,
|
|
|
April 24,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
Dollars in thousands
|
|
|
ASSETS
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash and equivalents
|
|
$
|
17,803
|
|
|
$
|
30,133
|
|
Accounts receivable
|
|
|
19,857
|
|
|
|
23,045
|
|
Inventories
|
|
|
25,920
|
|
|
|
31,087
|
|
Deferred income taxes
|
|
|
11,175
|
|
|
|
11,211
|
|
Prepaid expenses
|
|
|
2,169
|
|
|
|
1,311
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
76,924
|
|
|
|
96,787
|
|
Property, Plant and Equipment
|
|
|
|
|
|
|
|
|
Land
|
|
|
248,812
|
|
|
|
247,348
|
|
Buildings and improvements
|
|
|
934,919
|
|
|
|
918,227
|
|
Machinery and equipment
|
|
|
479,470
|
|
|
|
461,961
|
|
Construction in progress
|
|
|
1,438
|
|
|
|
2,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,664,639
|
|
|
|
1,630,268
|
|
Less accumulated depreciation
|
|
|
702,665
|
|
|
|
627,576
|
|
|
|
|
|
|
|
|
|
|
Net Property, Plant and Equipment
|
|
|
961,974
|
|
|
|
1,002,692
|
|
Other Assets
|
|
|
|
|
|
|
|
|
Deposit and other
|
|
|
4,143
|
|
|
|
4,856
|
|
Long-term investments
|
|
|
23,032
|
|
|
|
15,936
|
|
Goodwill
|
|
|
1,567
|
|
|
|
1,567
|
|
Other intangible assets
|
|
|
41,517
|
|
|
|
42,337
|
|
|
|
|
|
|
|
|
|
|
Total Other Assets
|
|
|
70,259
|
|
|
|
64,696
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,109,157
|
|
|
$
|
1,164,175
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Lines of credit
|
|
$
|
14,000
|
|
|
$
|
67,000
|
|
Current maturities of long-term debt
|
|
|
26,905
|
|
|
|
26,904
|
|
Accounts payable
|
|
|
29,322
|
|
|
|
43,584
|
|
Federal and state income taxes
|
|
|
8,708
|
|
|
|
9,867
|
|
Accrued nonincome taxes
|
|
|
21,085
|
|
|
|
22,670
|
|
Accrued wages and related liabilities
|
|
|
39,545
|
|
|
|
32,887
|
|
Self-insurance
|
|
|
24,165
|
|
|
|
23,833
|
|
Deferred revenue
|
|
|
14,447
|
|
|
|
14,103
|
|
Other accrued expenses
|
|
|
15,279
|
|
|
|
21,484
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
193,456
|
|
|
|
262,332
|
|
Long-Term Liabilities
|
|
|
|
|
|
|
|
|
Deferred compensation
|
|
|
26,396
|
|
|
|
19,808
|
|
Federal and state income taxes
|
|
|
10,050
|
|
|
|
13,605
|
|
Deferred income taxes
|
|
|
67,538
|
|
|
|
70,883
|
|
Deferred rent
|
|
|
24,273
|
|
|
|
23,649
|
|
Long-term debt
|
|
|
149,287
|
|
|
|
176,192
|
|
|
|
|
|
|
|
|
|
|
Total Long-Term Liabilities
|
|
|
277,544
|
|
|
|
304,137
|
|
Stockholders Equity
|
|
|
|
|
|
|
|
|
Common stock, $.01 par value; authorized
100,000,000 shares; issued 42,638,118 shares in 2010
and 2009
|
|
|
426
|
|
|
|
426
|
|
Capital in excess of par value
|
|
|
180,476
|
|
|
|
173,970
|
|
Retained earnings
|
|
|
788,049
|
|
|
|
738,668
|
|
Treasury stock, 12,265,865 shares in 2010 and
11,925,872 shares in 2009, at cost
|
|
|
(330,794
|
)
|
|
|
(315,358
|
)
|
|
|
|
|
|
|
|
|
|
Total Stockholders Equity
|
|
|
638,157
|
|
|
|
597,706
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,109,157
|
|
|
$
|
1,164,175
|
|
|
|
|
|
|
|
|
|
|
See Accompanying Notes to Consolidated Financial Statements
53
Bob Evans
Farms, Inc. and Subsidiaries
Consolidated Statements of Income
Years
Ended April 30, 2010; April 24, 2009; and
April 25, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
Dollars in thousands, except per share amounts
|
|
|
Net Sales
|
|
$
|
1,726,804
|
|
|
$
|
1,750,512
|
|
|
$
|
1,737,026
|
|
Cost of sales
|
|
|
516,667
|
|
|
|
537,085
|
|
|
|
517,358
|
|
Operating wage and fringe benefit expenses
|
|
|
596,050
|
|
|
|
597,806
|
|
|
|
604,198
|
|
Other operating expenses
|
|
|
276,521
|
|
|
|
280,393
|
|
|
|
282,029
|
|
Selling, general and administrative expenses
|
|
|
147,164
|
|
|
|
156,965
|
|
|
|
149,070
|
|
Depreciation and amortization expense
|
|
|
83,988
|
|
|
|
81,934
|
|
|
|
77,131
|
|
Goodwill and other intangibles impairment
|
|
|
0
|
|
|
|
67,962
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
|
106,414
|
|
|
|
28,367
|
|
|
|
107,240
|
|
Net interest expense
|
|
|
10,088
|
|
|
|
12,306
|
|
|
|
10,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Taxes
|
|
|
96,326
|
|
|
|
16,061
|
|
|
|
96,250
|
|
Provisions for income taxes
|
|
|
25,998
|
|
|
|
21,207
|
|
|
|
31,374
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
70,328
|
|
|
$
|
(5,146
|
)
|
|
$
|
64,876
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (Loss) Per Share Basic
|
|
$
|
2.29
|
|
|
$
|
(0.17
|
)
|
|
$
|
1.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (Loss) Per Share Diluted
|
|
$
|
2.28
|
|
|
$
|
(0.17
|
)
|
|
$
|
1.95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Dividends Paid Per Share
|
|
$
|
0.68
|
|
|
$
|
0.60
|
|
|
$
|
0.56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Accompanying Notes to Consolidated Financial Statements
54
Bob Evans
Farms, Inc. and Subsidiaries
Consolidated Statements of Stockholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
|
Common
|
|
|
|
|
|
Capital in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
|
Stock
|
|
|
Preferred
|
|
|
Excess of
|
|
|
Retained
|
|
|
Treasury
|
|
|
|
|
|
|
|
Shares
|
|
|
|
Amount
|
|
|
Stock
|
|
|
Par Value
|
|
|
Earnings
|
|
|
Stock
|
|
|
Total
|
|
|
|
|
|
|
|
|
Dollars in thousands, except per share
amounts
|
|
Stockholders Equity at 4/27/07
|
|
|
|
35,141,937
|
|
|
|
$
|
426
|
|
|
$
|
60
|
|
|
$
|
160,441
|
|
|
$
|
711,333
|
|
|
$
|
(167,029
|
)
|
|
$
|
705,231
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,876
|
|
|
|
|
|
|
|
64,876
|
|
Dividends declared ($0.56 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18,085
|
)
|
|
|
|
|
|
|
(18,085
|
)
|
Treasury stock repurchased
|
|
|
|
(5,000,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(154,593
|
)
|
|
|
(154,593
|
)
|
Treasury stock reissued under employee plans
|
|
|
|
469,408
|
|
|
|
|
|
|
|
|
|
|
|
|
7,497
|
|
|
|
|
|
|
|
6,722
|
|
|
|
14,219
|
|
Tax benefit employee plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,149
|
|
|
|
|
|
|
|
|
|
|
|
1,149
|
|
Cumulative effect of adopting the Income Taxes Topic of the FASB
ASC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(172
|
)
|
|
|
|
|
|
|
(172
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity at 4/25/08
|
|
|
|
30,611,345
|
|
|
|
|
426
|
|
|
|
60
|
|
|
|
169,087
|
|
|
|
757,952
|
|
|
|
(314,900
|
)
|
|
|
612,625
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,146
|
)
|
|
|
|
|
|
|
(5,146
|
)
|
Dividends declared ($0.60 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,138
|
)
|
|
|
|
|
|
|
(14,138
|
)
|
Treasury stock repurchased
|
|
|
|
(245,332
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,374
|
)
|
|
|
(5,374
|
)
|
Treasury stock reissued under employee plans
|
|
|
|
346,233
|
|
|
|
|
|
|
|
|
|
|
|
|
4,532
|
|
|
|
|
|
|
|
4,916
|
|
|
|
9,448
|
|
Preferred stock redemption
|
|
|
|
|
|
|
|
|
|
|
|
|
(60
|
)
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
(49
|
)
|
Tax benefit employee plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
340
|
|
|
|
|
|
|
|
|
|
|
|
340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity at 4/24/09
|
|
|
|
30,712,246
|
|
|
|
|
426
|
|
|
|
0
|
|
|
|
173,970
|
|
|
|
738,668
|
|
|
|
(315,358
|
)
|
|
|
597,706
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,328
|
|
|
|
|
|
|
|
70,328
|
|
Dividends declared ($0.68 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20,947
|
)
|
|
|
|
|
|
|
(20,947
|
)
|
Treasury stock repurchased
|
|
|
|
(731,814
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21,123
|
)
|
|
|
(21,123
|
)
|
Treasury stock reissued under employee plans
|
|
|
|
391,821
|
|
|
|
|
|
|
|
|
|
|
|
|
6,131
|
|
|
|
|
|
|
|
5,687
|
|
|
|
11,818
|
|
Tax benefit employee plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
375
|
|
|
|
|
|
|
|
|
|
|
|
375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity at 4/30/10
|
|
|
|
30,372,253
|
|
|
|
$
|
426
|
|
|
$
|
0
|
|
|
$
|
180,476
|
|
|
$
|
788,049
|
|
|
$
|
(330,794
|
)
|
|
$
|
638,157
|
|
See Accompanying Notes to Consolidated Financial Statements
55
Bob Evans
Farms, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Years
ended April 30, 2010; April 24, 2009; and
April 25, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
Dollars in thousands
|
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
70,328
|
|
|
$
|
(5,146
|
)
|
|
$
|
64,876
|
|
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
83,988
|
|
|
|
81,934
|
|
|
|
77,131
|
|
Goodwill and other intangibles impairment
|
|
|
0
|
|
|
|
67,962
|
|
|
|
0
|
|
Deferred compensation
|
|
|
6,446
|
|
|
|
(6,670
|
)
|
|
|
2,589
|
|
Deferred income taxes
|
|
|
(3,309
|
)
|
|
|
60
|
|
|
|
(4,860
|
)
|
Loss on fixed assets
|
|
|
5,146
|
|
|
|
7,258
|
|
|
|
686
|
|
(Gain) loss on long-term investments
|
|
|
(5,328
|
)
|
|
|
6,486
|
|
|
|
307
|
|
Compensation expense attributable to stock plans
|
|
|
7,530
|
|
|
|
6,737
|
|
|
|
6,345
|
|
Deferred rent
|
|
|
624
|
|
|
|
1,242
|
|
|
|
2,021
|
|
Cash provided by (used for) current assets and current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
3,188
|
|
|
|
(3,094
|
)
|
|
|
564
|
|
Inventories
|
|
|
5,167
|
|
|
|
258
|
|
|
|
(2,672
|
)
|
Prepaid expenses
|
|
|
(858
|
)
|
|
|
(44
|
)
|
|
|
(116
|
)
|
Accounts payable
|
|
|
(14,262
|
)
|
|
|
4,333
|
|
|
|
2,321
|
|
Federal and state income taxes
|
|
|
(4,714
|
)
|
|
|
(1,598
|
)
|
|
|
2,125
|
|
Accrued wages and related liabilities
|
|
|
6,658
|
|
|
|
(5,600
|
)
|
|
|
(4,212
|
)
|
Self-insurance
|
|
|
332
|
|
|
|
1,056
|
|
|
|
1,726
|
|
Accrued nonincome taxes
|
|
|
(1,585
|
)
|
|
|
(3
|
)
|
|
|
1,283
|
|
Deferred revenue
|
|
|
344
|
|
|
|
1,299
|
|
|
|
(4,711
|
)
|
Other accrued expenses
|
|
|
(6,205
|
)
|
|
|
(4,325
|
)
|
|
|
8,155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
153,490
|
|
|
|
152,145
|
|
|
|
153,558
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment
|
|
|
(51,266
|
)
|
|
|
(95,985
|
)
|
|
|
(120,955
|
)
|
Purchase of long-term investments
|
|
|
(1,841
|
)
|
|
|
(2,366
|
)
|
|
|
(2,611
|
)
|
Proceeds from sale of property, plant and equipment
|
|
|
3,743
|
|
|
|
3,667
|
|
|
|
14,566
|
|
Other
|
|
|
713
|
|
|
|
(718
|
)
|
|
|
930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(48,651
|
)
|
|
|
(95,402
|
)
|
|
|
(108,070
|
)
|
Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid
|
|
|
(20,947
|
)
|
|
|
(18,424
|
)
|
|
|
(18,719
|
)
|
Purchase of treasury stock
|
|
|
(21,123
|
)
|
|
|
(5,374
|
)
|
|
|
(154,593
|
)
|
Borrowings (repayments) on lines of credit
|
|
|
(53,000
|
)
|
|
|
(71,500
|
)
|
|
|
138,500
|
|
Proceeds from debt issuance
|
|
|
0
|
|
|
|
70,000
|
|
|
|
0
|
|
Principal payments on long-term debt
|
|
|
(26,904
|
)
|
|
|
(26,904
|
)
|
|
|
(46,333
|
)
|
Excess tax benefits from stock-based compensation
|
|
|
375
|
|
|
|
340
|
|
|
|
1,149
|
|
Proceeds from issuance of treasury stock
|
|
|
4,430
|
|
|
|
2,711
|
|
|
|
7,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(117,169
|
)
|
|
|
(49,151
|
)
|
|
|
(72,121
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and equivalents
|
|
|
(12,330
|
)
|
|
|
7,592
|
|
|
|
(26,633
|
)
|
Cash and equivalents at the beginning of the year
|
|
|
30,133
|
|
|
|
22,541
|
|
|
|
49,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and equivalents at the end of the year
|
|
$
|
17,803
|
|
|
$
|
30,133
|
|
|
$
|
22,541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Accompanying Notes to Consolidated Financial Statements
56
Bob Evans
Farms, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
April 30,
2010
|
|
Note A
|
Summary
of Significant Accounting Policies
|
Description of Business: As of April 30,
2010, 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) owned and operated 715
full-service restaurants, including 569 Bob Evans Restaurants in
18 states and 146 Mimis Cafés in 24 states.
Bob Evans Restaurants are primarily located in the Midwest,
mid-Atlantic and Southeast regions of the United States.
Mimis Cafés are primarily in California and other
western states. 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.
Principles of Consolidation: The consolidated
financial statements include the accounts of Bob Evans and its
subsidiaries. Intercompany accounts and transactions have been
eliminated.
Fiscal Year: Our fiscal year ends on the last
Friday in April. References herein to fiscal 2010, fiscal 2009
and fiscal 2008 refer to fiscal years ended April 30, 2010;
April 24, 2009; and April 25, 2008, respectively. All
years presented were comprised of 52 weeks, except for
fiscal 2010, which contains 53 weeks.
Revenue Recognition: Revenue is recognized in
the restaurant segment at the point of sale, other than revenue
from the sale of gift cards, which is deferred and recognized
upon redemption. Revenue in the food products segment is
generally recognized when products are delivered to our
customers warehouses. All revenue is presented net of
sales tax collections.
We issue gift cards (and prior to fiscal 2006, issued gift
certificates; collectively, gift cards) which
contain no expiration dates or inactivity fees. We recognize
revenue from gift cards when they are redeemed by the customer.
In addition, we recognize income on unredeemed gift cards
(gift card breakage) when the likelihood of
redemption is remote and there is no legal obligation to remit
the unredeemed gift cards to state government(s). We determine
the gift card breakage rate based on historical redemption
patterns. Gift card breakage is included in net sales in the
Consolidated Statements of Income, and the liability for
unredeemed gift cards is included in deferred revenue on the
Consolidated Balance Sheets.
Fiscal 2008 was the first year in which we recognized gift card
breakage income for Bob Evans Restaurants. As a result, $6,600
of pretax income was recorded in the third quarter of fiscal
2008, which included gift card breakage income related to gift
cards sold since the inception of our gift card program.
Cash Equivalents: We consider all highly
liquid instruments with a maturity of three months or less when
purchased to be cash equivalents.
Accounts Receivable: Accounts receivable
represents amounts owed to us through our operating activities
and are presented net of allowance for doubtful accounts. We
evaluate the collectability of our accounts receivable based on
a combination of factors. In circumstances where we are aware of
a specific customers inability to meet its financial
obligations to us, we record a specific allowance for bad debts
against amounts due to reduce the net recognized receivable to
the amount we reasonably believe will be collected. In addition,
we recognize allowances for bad debts based on the length of
time receivables are past due with allowance percentages, based
on its historical experiences, applied on a graduated scale
relative to the age of the receivable amounts. If circumstances
such as higher than expected bad debt experience or an
unexpected material adverse change in a major customers
ability to meet its financial obligations to us were to occur,
we estimate of the recoverability of amounts due to us could
change by a material amount. Amounts deemed uncollectible are
written-off against an established allowance for doubtful
accounts.
Concentration of Credit Risk and Major
Customers: We maintain cash depository accounts
with major banks and invest in high-quality short-term liquid
instruments. Such investments are made only in instruments
issued or
57
Bob Evans
Farms, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements
(Continued)
enhanced by high-quality institutions. These investments mature
within three months and we have not incurred any related losses.
Accounts receivable can be potentially exposed to a
concentration of credit risk with customers or in particular
industries. Such credit risk is considered by management to be
limited due to our many customers, none of which are considered
principal in our total operations and doing business in a
variety of industries throughout the world. We do have two
individual customers that exceed 10 percent of total revenue. In
addition, we perform ongoing credit evaluations of our
customers financial conditions and maintain reserves for
credit losses. Such losses historically have been within our
expectations.
Inventories: We value inventories at the lower
of first-in,
first-out cost or market. Inventory includes raw materials and
supplies ($18,956 in fiscal 2010 and $22,400 in fiscal
2009) and finished goods ($6,964 in fiscal 2010 and $8,687
in fiscal 2009).
Assets Held for Sale: In accordance with the
Property, Plant and Equipment Topic of the Financial Accounting
Standards Board (FASB) Accounting Standards
Codification (ASC), we classify certain land,
buildings and equipment as held for sale in the
Consolidated Balance Sheets when we believe these assets will be
disposed of within the next 12 months. Assets held for sale
are reported at the lower of the carrying amount or the fair
value and depreciation of these assets has ceased. We did not
have any assets held for sale at the end of fiscal 2010 or
fiscal 2009.
Property, Plant and Equipment: Property, plant
and equipment are recorded at cost less accumulated
depreciation. The straight-line depreciation method is used for
nearly all capitalized assets, although some assets purchased
prior to fiscal 1995 continue to be depreciated using
accelerated methods. Depreciation is calculated at rates
adequate to amortize costs over the estimated useful lives of
buildings and improvements (15 to 25 years) and machinery
and equipment (3 to 10 years). Improvements to leased
properties are depreciated over the shorter of their useful
lives or the lease terms. Total depreciation expense was
$83,095; $80,892; and $75,959 in fiscal 2010, fiscal 2009 and
fiscal 2008, respectively.
We sell real property via like-kind exchanges under Internal
Revenue Code Section 1031 whereby gains are not recognized
for federal income tax purposes. We recognize all such gains for
financial reporting purposes in the period the property is sold.
Consolidated results for fiscal 2010, fiscal 2009 and fiscal
2008 include net pretax gains of $1,362; $1,032 and $2,865,
respectively, on sale of assets. The gains are classified as a
reduction of Selling, general and administrative expenses
(S,G&A) in the Consolidated Statements of
Income.
We evaluate property, plant and equipment held and used in the
business for impairment whenever events or changes in
circumstances indicate that the carrying amount of a long-lived
asset may not be recoverable. Impairment is determined by
comparing the estimated undiscounted future operating cash flows
for the asset group to the carrying amount of its assets. If
impairment exists, the amount of impairment is measured as the
excess of the carrying amount over the estimated discounted
future operating cash flows of the asset and the expected
proceeds upon sale of the asset.
During fiscal 2010, we identified certain operating and closed
locations with negative cash flow, declining net sales
performance or other potential indicators of impairment, and
recorded a $6,195 pretax fixed asset impairment charge in the
restaurant segment for four Bob Evans Restaurant operating
locations and 22 other properties. In fiscal 2009, a pretax
fixed asset impairment charge of $6,444 was recognized in the
restaurant segment for six underperforming Mimis
restaurants. In fiscal 2008, a pretax impairment charge of
$3,659 was recognized in the restaurant segment related to nine
underperforming Bob Evans Restaurants, which were subsequently
closed. The fixed asset impairment charges are reflected in
S,G&A expenses in the Consolidated Statements of Income.
Long-term Investments: Long-term investments
include assets held under certain deferred compensation
arrangements, which represent the cash surrender value of
company-owned life insurance policies and investments in income
tax credit limited partnerships. An offsetting liability for the
amount of the cash surrender value of
58
Bob Evans
Farms, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements
(Continued)
company-owned life insurance is included in the Deferred
compensation amount on the Consolidated Balance Sheets.
Investments in income tax credit limited partnerships are
recorded at amortized cost. We amortize the investments to the
expected residual value of the partnerships once the income tax
credits are fully utilized. The amortization period of the
investments matches the respective income tax credit period.
Goodwill: Goodwill, which represents the cost
in excess of fair market value of net assets acquired, was
$1,567 for both fiscal 2010 and fiscal 2009. Goodwill is not
amortized; rather it is tested for impairment at the beginning
of the fourth quarter each year or on a more frequent basis when
events occur or circumstances change between the annual tests
that would more likely than not reduce the fair value of the
reporting unit below its carrying value. In the third quarter of
fiscal 2009, we determined that indicators for potential
impairment existed based on our consolidated stock valuation
relative to our book value, a scaled-back development plan for
Mimis and continued declining same-store sales at
Mimis. We performed interim impairment tests of goodwill
and determined that the carrying value of Mimis goodwill
was fully impaired. Therefore, we recorded a pretax goodwill
impairment charge in the restaurant segment in the third quarter
of fiscal 2009 for the entire $56,162. See Note G.
Other Intangible Assets: Other intangible
assets consist of the Mimis business trade name and
restaurant concept. The trade name intangible asset is deemed to
have an indefinite economic life and is not amortized. It is
tested for impairment at the beginning of the fourth quarter
each year or on a more frequent basis if events or changes in
circumstances indicate the asset might be impaired. The
restaurant concept intangible asset is amortized on a
straight-line basis over its estimated economic life of
15 years. In the third quarter of fiscal 2009, we
determined that indicators for potential impairment existed
based on our consolidated stock valuation relative to our book
value, a scaled-back development plan for Mimis and
continued declining same-store sales at Mimis. We
performed interim impairment tests of Mimis other
intangible assets and determined that the business trade name
had a fair value of $34,000, compared to a carrying value of
$45,800. Therefore, we recorded a pretax impairment charge of
$11,800 related to the business trade name in the restaurant
segment in the third quarter of fiscal 2009. In fiscal 2010,
there was no intangible asset impairment charge. See Note G.
Financial Instruments: The fair values of our
financial instruments (other than long-term debt) approximate
their carrying values at April 30, 2010, and April 24,
2009. At April 30, 2010, the estimated fair value of our
long-term debt approximated $184,728 compared to a carrying
amount of $176,192. At April 24, 2009, the estimated fair
value of our long-term debt approximated $192,400 compared to a
carrying amount of $203,096. 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.
Treasury Stock: During fiscal 2010, fiscal
2009 and fiscal 2008, we followed a policy of issuing treasury
shares to satisfy award exercises or conversions.
Self-insurance: We are self-insured for most
workers compensation, general liability and automotive
liability losses (collectively casualty losses), as
well as employee health-care claims. We maintain certain
stop-loss coverages with third party insurers to limit our total
exposure per claim. The recorded liability associated with these
programs is based on an estimate of the ultimate costs to be
incurred to settle known claims and claims incurred but not
reported as of the balance sheet date. The estimated liability
is not discounted and is based on a number of assumptions and
factors, including historical trends, actuarial assumptions and
economic conditions.
Preopening Expenses: Expenditures related to
the opening of new restaurants, other than those for capital
assets, are expensed when incurred.
Advertising Costs: We expense advertising
costs as incurred. Advertising expense was $45,648; $45,708; and
$40,775 in fiscal 2010, fiscal 2009 and fiscal 2008,
respectively.
Cost of Sales: Cost of sales represents
primarily food cost in the restaurant segment and cost of
materials in the food products segment. Cash rebates that we
receive from suppliers are recorded as a reduction of cost of
sales in
59
Bob Evans
Farms, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements
(Continued)
the periods in which they are earned. The amount of each rebate
is directly related to the quantity of product purchased from
the supplier.
Promotional Spending: In our food products
segment, we engage in promotional (sales incentive) programs in
the form of off-invoice deductions, billbacks,
cooperative advertising and coupons. Costs associated with these
programs are classified as a reduction of net sales in the
period in which the sale occurs.
Comprehensive Income: Comprehensive income is
the same as reported net income.
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
outstanding stock options.
The numerator in calculating both basic and diluted earnings per
share for each year is reported net income. The denominator is
based on the following weighted-average number of common shares
outstanding (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Basic
|
|
|
30,775
|
|
|
|
30,744
|
|
|
|
33,065
|
|
Dilutive stock options
|
|
|
115
|
|
|
|
0
|
|
|
|
250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
30,890
|
|
|
|
30,744
|
|
|
|
33,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options to purchase 690,952 and 67,794 shares of common
stock in fiscal 2010 and fiscal 2008, respectively, were
excluded from the diluted
earnings-per-share
calculations because they were antidilutive. All outstanding
options were excluded from the diluted
earnings-per-share
calculation in fiscal 2009 because we had a net loss for the
year.
Use of Estimates: The preparation of financial
statements in conformity with generally accepted accounting
principles requires us to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and
expenses and disclosure of contingent assets and liabilities.
Actual results could differ from the estimates and assumptions
used.
Stock-based Employee Compensation: At
April 30, 2010, we had a stock-based employee compensation
plan that is described more fully in Note D. We record
stock-based compensation expense by measuring the cost of
employee services received in exchange for an equity award, such
as stock options or restricted stock awards, based on the fair
value of the award on the grant date. The cost is recognized in
the income statement over the vesting period of the award on a
straight-line basis. Awards to retirement-eligible employees are
subject to immediate expensing in full upon grant.
Leases: Rent expense for our operating leases,
which generally have escalating rent payments over the term of
the leases, is recorded on a straight-line basis over the lease
term. The lease term begins when we have the right to control
the use of the leased property, which is typically before rent
payments are due under the terms of the lease. The difference
between the straight-line rent calculation and rent paid is
recorded as deferred rent in the Consolidated
Balance Sheets. We expense all straight-line rent recorded
during the build-out period for new restaurants.
Contingent rents are generally amounts due as a result of net
sales in excess of amounts stipulated in certain restaurant
leases and are included in rent expense as they accrue.
Rental expense in fiscal 2010, fiscal 2009 and fiscal 2008 was
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Minimum rent
|
|
$
|
27,693
|
|
|
$
|
27,045
|
|
|
$
|
25,238
|
|
Contingent rent
|
|
|
462
|
|
|
|
1,195
|
|
|
|
1,389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total rent
|
|
$
|
28,155
|
|
|
$
|
28,240
|
|
|
$
|
26,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60
Bob Evans
Farms, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements
(Continued)
In some instances, we have received contributions from landlords
to help fund the construction of new restaurants. We account for
landlord contributions as lease incentive obligations that are
amortized as a reduction to rent expense over the applicable
lease term. Lease incentive obligations are included in the
Consolidated Balance Sheets as deferred rent.
Reclassifications: Certain prior-year amounts
have been reclassified to conform to the fiscal 2010
classification.
New Accounting Pronouncements: The Fair Value
Measurements and Disclosures Topic of the FASB ASC clarifies the
definition of fair value, establishes a framework for measuring
fair value and expands the disclosures for fair value
measurements. The guidance became effective for fiscal years
beginning after November 15, 2007 (our fiscal 2009), for
financial assets and liabilities, as well as for any other
assets and liabilities that are carried at fair value on a
recurring basis in the financial statements. The guidance became
effective in our fiscal 2010 for all other nonfinancial assets
and liabilities. The adoption of this statement did not have a
material effect on our consolidated financial position or
results of operations.
The Financial Instruments Topic of the FASB ASC increases the
frequency of fair value disclosures for financial instruments
within the scope of the Topic to a quarterly basis rather than
annually. This guidance became effective for interim and annual
periods ending after June 15, 2009. We adopted this
guidance in the first quarter of fiscal 2010. Except for the
disclosure requirements, the adoption of this guidance did not
have a material effect on our consolidated financial position or
results of operations.
The Business Combinations Topic of the FASB ASC is effective for
our fiscal 2010 and requires that the acquisition method of
accounting be applied to a broader set of business combinations,
amends the definition of a business combination, provides a
definition of a business, requires an acquirer to recognize an
acquired business at its fair value at the acquisition date, and
requires the assets and liabilities assumed in a business
combination to be measured and recognized at their fair values
as of the acquisition date (with limited exceptions). The effect
of this guidance on future periods will depend on the nature and
significance of any acquisitions we subsequently make that are
subject to this statement.
The Generally Accepted Accounting Principles Topic of the FASB
ASC identifies the sources of accounting principles and the
framework for selecting the principles to be used in the
preparation of financial statements of nongovernmental entities
that are presented in conformity with generally accepted
accounting principles in the United States. The guidance became
effective for interim and annual fiscal periods ending after
September 15, 2009 (our fiscal 2010 second quarter). We
adopted this statement in the first quarter of fiscal 2010 and
it did not have a material effect on our consolidated financial
position or results of operations.
|
|
Note B
|
Long-Term
Debt and Credit Arrangements
|
|
Long-term debt is comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2010
|
|
|
April 24, 2009
|
|
|
Unsecured senior notes issued July 28, 2004:
|
|
|
|
|
|
|
|
|
Series B, due July 2010, 4.61%
|
|
$
|
13,334
|
|
|
$
|
26,667
|
|
Series C, due July 2014, 5.12%
|
|
|
67,858
|
|
|
|
81,429
|
|
Series D, due July 2016, 5.67%
|
|
|
25,000
|
|
|
|
25,000
|
|
Unsecured senior notes issued July 28, 2008:
|
|
|
|
|
|
|
|
|
Series A, due July 2014, 6.39%
|
|
|
40,000
|
|
|
|
40,000
|
|
Series B, due July 2013, 6.39%
|
|
|
30,000
|
|
|
|
30,000
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
|
176,192
|
|
|
|
203,096
|
|
Less: current portion of long-term debt
|
|
|
26,905
|
|
|
|
26,904
|
|
|
|
|
|
|
|
|
|
|
Long-term debt less current portion
|
|
$
|
149,287
|
|
|
$
|
176,192
|
|
|
|
|
|
|
|
|
|
|
61
Bob Evans
Farms, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements
(Continued)
On July 28, 2004, we completed a private placement of
$190 million in senior unsecured fixed-rate notes. The
senior notes outstanding at April 30, 2010, mature over a
period from July 2010 to July 2016, and carry a weighted-average
interest rate of 5.2 percent, which we pay quarterly.
In the second quarter of fiscal 2009, we completed a private
placement of $70 million in senior unsecured fixed-rated
notes. These notes were issued in two series. The
$40 million Series A senior notes bear interest at
6.39 percent and mature on July 28, 2014, with a
mandatory prepayment of $20 million due on July 28,
2012. The $30 million Series B senior notes bear
interest at 6.39 percent and mature on July 28, 2013.
The net proceeds from the notes we issued in fiscal 2009 were
used to repay outstanding debt under existing bank credit
facilities and to repay a portion of our previously outstanding
senior notes.
Both of our senior note issues contain covenants customary for
financings of this type that limit our ability to incur liens on
assets, merge or consolidate with other entities, transfer or
sell a substantial part of our assets, substantially change the
nature of our business, engage in sale and leaseback
transactions and enter into transactions with affiliates. We are
also prohibited, subject to certain limited exceptions, from
granting collateral under our credit facilities with our lenders
unless such collateral is also granted to the note holders on an
equal basis. The senior notes contain financial covenants that
require certain net worth and fixed charge coverage ratios and
place limitations on our indebtedness.
As of April 30, 2010, we were in compliance with these
covenants and restrictions. The senior notes also contain
customary events of default, the occurrence of which will permit
the holders of the notes to accelerate payment of the notes.
As of April 30, 2010, maturities of long-term debt are as
follows:
|
|
|
|
|
2011
|
|
$
|
26,905
|
|
2012
|
|
|
13,571
|
|
2013
|
|
|
38,571
|
|
2014
|
|
|
48,571
|
|
2015
|
|
|
38,574
|
|
Thereafter
|
|
|
10,000
|
|
|
|
|
|
|
Total
|
|
$
|
176,192
|
|
|
|
|
|
|
We also have unsecured borrowing arrangements with certain banks
from which we may borrow up to $120,000, on a short-term basis
at floating interest rates. The arrangements are reviewed
annually for renewal. During fiscal 2010, total available bank
lines of credit were reduced from $165,000 to $120,000. At
April 30, 2010, $14,000 was outstanding under these
arrangements. During fiscal 2010, the maximum amount outstanding
under these unsecured lines of credit was $83,000, and the
average amount outstanding was $55,616 with a weighted-average
interest rate of 0.88 percent. During fiscal 2009, the
maximum outstanding under these unsecured lines of credit was
$143,000 and the average amount outstanding was $106,057 with a
weighted-average interest rate of 2.58 percent.
Interest costs of $836; $933; and $1,325 incurred in fiscal
2010, fiscal 2009 and fiscal 2008, respectively, were
capitalized in connection with our construction activities.
Interest paid in fiscal 2010, fiscal 2009 and fiscal 2008 was
$10,972; $13,620; and $13,031, respectively.
62
Bob Evans
Farms, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements
(Continued)
Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. Significant components of our
deferred tax liabilities and assets as of April 30, 2010,
and April 24, 2009, were as follows:
|
|
|
|
|
|
|
|
|
|
|
April 30,
|
|
|
April 24,
|
|
|
|
2010
|
|
|
2009
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Loss on impaired assets
|
|
$
|
7,760
|
|
|
$
|
7,835
|
|
Self-insurance
|
|
|
6,776
|
|
|
|
7,080
|
|
Vacation pay
|
|
|
1,909
|
|
|
|
1,875
|
|
Stock and deferred compensation plans
|
|
|
17,039
|
|
|
|
11,814
|
|
Accrued bonus
|
|
|
1,130
|
|
|
|
686
|
|
Tax credits
|
|
|
0
|
|
|
|
1,249
|
|
Deferred rent
|
|
|
6,405
|
|
|
|
6,201
|
|
Other
|
|
|
2,342
|
|
|
|
696
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
43,361
|
|
|
|
37,436
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Accelerated depreciation/asset disposals
|
|
|
83,829
|
|
|
|
81,297
|
|
Intangible assets
|
|
|
15,364
|
|
|
|
15,731
|
|
Other
|
|
|
531
|
|
|
|
80
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
99,724
|
|
|
|
97,108
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax liabilities
|
|
$
|
56,363
|
|
|
$
|
59,672
|
|
|
|
|
|
|
|
|
|
|
Significant components of the provisions for income taxes are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
23,878
|
|
|
$
|
17,356
|
|
|
$
|
30,128
|
|
State
|
|
|
5,429
|
|
|
|
3,791
|
|
|
|
6,106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
|
|
|
29,307
|
|
|
|
21,147
|
|
|
|
36,234
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(2,470
|
)
|
|
|
(170
|
)
|
|
|
(3,314
|
)
|
State
|
|
|
(839
|
)
|
|
|
230
|
|
|
|
(1,546
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred
|
|
|
(3,309
|
)
|
|
|
60
|
|
|
|
(4,860
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total tax provisions
|
|
$
|
25,998
|
|
|
$
|
21,207
|
|
|
$
|
31,374
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63
Bob Evans
Farms, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements
(Continued)
Our provisions for income taxes differ from the amounts computed
by applying the federal statutory rate due to the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Tax at statutory rate
|
|
$
|
33,714
|
|
|
$
|
5,621
|
|
|
$
|
33,688
|
|
State income tax (net)
|
|
|
2,983
|
|
|
|
2,614
|
|
|
|
2,964
|
|
Goodwill impairment
|
|
|
0
|
|
|
|
19,657
|
|
|
|
0
|
|
FICA tip credits
|
|
|
(4,937
|
)
|
|
|
(4,937
|
)
|
|
|
(4,607
|
)
|
Settlement of state income tax audits (net)
|
|
|
(2,534
|
)
|
|
|
(1,172
|
)
|
|
|
0
|
|
Cash surrender value of life insurance
|
|
|
(1,925
|
)
|
|
|
2,142
|
|
|
|
116
|
|
Work opportunity tax credits
|
|
|
(852
|
)
|
|
|
(949
|
)
|
|
|
(762
|
)
|
Limited partnership tax credits
|
|
|
(83
|
)
|
|
|
(266
|
)
|
|
|
(397
|
)
|
Other
|
|
|
(368
|
)
|
|
|
(1,503
|
)
|
|
|
372
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provisions for income taxes
|
|
$
|
25,998
|
|
|
$
|
21,207
|
|
|
$
|
31,374
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxes paid during fiscal 2010, fiscal 2009 and fiscal 2008 were
$34,167; $26,480; and $33,764, respectively.
Our effective tax rate is based on income, statutory tax rates
and tax planning opportunities available to us in the various
jurisdictions in which we operate. Significant judgment is
required in evaluating our tax positions, which has an impact on
our effective tax rate. We establish reserves when, despite our
belief that our tax return positions are fully supportable, we
believe that certain positions are likely to be challenged based
on technical merits.
A tax benefit from an uncertain tax position is recognized when
it is more likely than not that the position will be sustained
upon examination, including the resolution of any related
appeals or litigation, based on the technical merits. The amount
recognized is measured as the largest amount of tax benefit that
is more than 50 percent likely to be realized upon
settlement. The cumulative effect of the adoption of the Income
Taxes Topic of the FASB ASC was a $172 reduction in the fiscal
2008 opening balance of retained earnings. Prior to the adoption
of the Income Taxes Topic of the FASB ASC, we accrued for tax
contingencies in accordance with the requirements of the
Contingencies Topic of the FASB ASC.
In fiscal 2010, the amount of our unrecognized tax benefits
decreased by $2,687, primarily due to reductions in tax
contingencies for statute of limitations expirations and audit
settlements. A reconciliation of the beginning and ending
amounts of unrecognized tax benefits is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Balance at beginning of fiscal year
|
|
$
|
11,773
|
|
|
$
|
15,381
|
|
|
$
|
13,473
|
|
Additions based on tax positions related to the current year
|
|
|
752
|
|
|
|
404
|
|
|
|
1,866
|
|
Additions for tax positions of prior years
|
|
|
0
|
|
|
|
1,260
|
|
|
|
969
|
|
Reductions for tax positions of prior years
|
|
|
0
|
|
|
|
(1,524
|
)
|
|
|
(420
|
)
|
Reductions due to settlements with taxing authorities
|
|
|
(2,862
|
)
|
|
|
(1,565
|
)
|
|
|
0
|
|
Reductions due to statute of limitations expiration
|
|
|
(577
|
)
|
|
|
(2,183
|
)
|
|
|
(507
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of fiscal year
|
|
$
|
9,086
|
|
|
$
|
11,773
|
|
|
$
|
15,381
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The total amount of unrecognized tax benefits that, if
recognized, would affect the effective tax rate as of
April 30, 2010, and April 24, 2009, was $7,697 and
$6,907, respectively. The remaining unrecognized tax benefits
relate to tax positions for which ultimate deductibility is
highly certain, but for which there is uncertainty as to the
timing of such deductibility. Recognition of these tax benefits
would not affect our effective tax rate. We reasonably expect to
resolve state tax audits in the next 12 months which could
result in the recognition of previously unrecognized tax
benefits of $500 to $1,800 and would affect the effective tax
rate. It is reasonably possible that the amount of unrecognized
tax benefits may increase or decrease within the next
12 months for reasons other than the
64
Bob Evans
Farms, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements
(Continued)
settlement of tax audits. However, we do not presently
anticipate that any increase or decrease in unrecognized tax
benefits will be material to our consolidated financial
statements.
We recognize interest and penalties related to unrecognized tax
benefits as a component of income tax expense in the
Consolidated Statements of Income. During fiscal 2010, fiscal
2009 and fiscal 2008, we recognized approximately $761, $283 and
$2,338, respectively, of interest and penalties in tax expense.
As of April 30, 2010, and April 24, 2009, we had
accrued approximately $3,694 and $5,440, respectively, in
interest and penalties related to unrecognized tax benefits.
We file United States federal and various state and local income
tax returns. With few exceptions, we are subject to audit by
taxing authorities for fiscal years 2007 through 2009. Our
federal and state income tax return filings generally are
subject to a three-year statute of limitations from the date of
filing. However, we may grant waivers to taxing authorities to
extend the statute of limitations for prior tax years. Based on
the status of current audits and the protocol of finalizing
audits by relevant tax authorities, it is not possible to
estimate the impact of changes, if any, to previously recorded
unrecognized tax benefits.
|
|
Note D
|
Stock-Based
Compensation Plans
|
On September 11, 2006, our stockholders approved the Bob
Evans Farms, Inc. 2006 Equity and Cash Incentive Plan (the
2006 Plan). Upon approval, the 2006 Plan became our
only plan under which new stock-based compensation can be
granted. At April 30, 2010, there were awards outstanding
under the 2006 Plan, as well as previous equity plans adopted in
1998, 1994, 1993 and 1992.
The types of awards that may be granted under the 2006 plan
include: cash-based awards, stock options, performance shares,
performance units, restricted stock, restricted stock units,
stock appreciation rights, whole share awards and
performance-based awards. The Compensation Committee of the
Board of Directors administers the 2006 Plan, including
establishing the terms and conditions of awards. The 2006 Plan
imposes various restrictions on awards, including a maximum
life of 10 years for stock options and stock appreciation
rights and a minimum exercise price equal to the grant date
stock price for stock options and stock appreciation rights.
The 1998 plan provided that the option price
for: (1) incentive stock options may not be less
than the fair market value of the stock at the grant date and
(2) nonqualified stock options shall be determined by the
Compensation Committee of the Board of Directors. The 1994 plan
prohibited option prices less than the fair market value of the
stock at the grant date.
The 1993 plan provided for the award of restricted stock to
mid-level managers and administrative personnel as incentive
compensation to attain growth in the net income of the company,
as well as to help attract and retain management personnel.
Shares awarded are restricted until certain vesting requirements
are met. Participants in the 1993 plan are entitled to receive
cash dividends and to vote their respective shares, including
those not yet vested. Restrictions generally limit the sale,
pledge or transfer of the shares until they are vested.
The 1992 plan was adopted in connection with our supplemental
executive retirement plan (SERP), which provides
retirement benefits to certain key management employees. In the
past, SERP participants could elect to have their awards
allocated to their accounts in cash or, when permitted by the
Compensation Committee, they could receive an equivalent value
of nonqualified stock options. The 1992 plan provided that the
option price could not be less than 50 percent of the fair
market value of the stock at the date of grant. The last grant
of stock options under the 1992 plan was in fiscal 2003. Since
fiscal 2003, all SERP awards have been allocated to
participants accounts in cash.
In 2006, we adopted a performance incentive plan
(PIP) designed to align the compensation of
executive officers and senior management with our financial and
operational performance. The PIP provides for awards of cash,
whole shares, restricted shares and stock options, generally
vesting over three years. All stock-based awards
65
Bob Evans
Farms, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements
(Continued)
made under the PIP prior to September 11, 2006, were
awarded out of, and in accordance with, the 1998 plan. All PIP
awards made after that date have been awarded out of, and in
accordance with, the 2006 Plan.
In fiscal 2010, we amended the terms of the employment agreement
with the chief executive officer (CEO). The amended
agreement provides for a one-time Long-Term Performance-Based
Incentive (the LTPBI). The purpose of the LTPBI is
to increase stockholder value by establishing additional
compensation incentives linked directly to our performance over
the five-year period, which began in fiscal 2010 and goes
through fiscal 2014. The CEO may earn performance shares based
on our performance during this five-year period relative to
goals set by the Compensation Committee for net income growth
and total stockholder return. The number of shares ultimately
earned by the CEO will be determined by the Compensation
Committee at the end of the five-year period based on the terms
of the LTPBI award agreement.
Effective April 29, 2006 (our fiscal 2007), we adopted the
Compensation Stock Compensation Topic of the FASB
ASC, using the modified-prospective transition method. The
Compensation Stock Compensation Topic of the FASB
ASC requires that we measure the cost of employee services
received in exchange for an equity award, such as stock options
or restricted stock awards, based on the fair value of the award
on the grant date. The cost is recognized in the income
statement over the vesting period of the award on a
straight-line basis. Awards to retirement-eligible employees are
subject to immediate expensing in full upon grant. Compensation
cost recognized includes: (1) compensation cost for all
stock-based awards granted prior to, but not yet fully vested as
of April 28, 2006, based on the grant date fair value
estimated in accordance with the original provisions of the
Compensation Stock Compensation Topic of the FASB
ASC and (2) compensation cost for all stock-based awards
granted after April 28, 2006, based on the grant date fair
value estimated in accordance with the Compensation
Stock Compensation Topic of the FASB ASC. Total stock-based
compensation cost in fiscal 2010, fiscal 2009 and fiscal 2008
was $7,530; $6,775; and $6,345, respectively. The related tax
benefit recognized was $2,069; $2,116; and $2,029 in fiscal
2010, fiscal 2009 and fiscal 2008, respectively. Nearly all of
the expense associated with stock-based compensation is
reflected in S,G&A expense.
The fair value of each option awarded in fiscal 2010, fiscal
2009 and fiscal 2008 was estimated on the date of grant using
the Black-Scholes option-pricing model. The expected term of
options granted is based on the historical exercise behavior of
full-term options, and the expected volatility is based on the
historical volatility of our common stock. The risk-free rate is
based on the U.S. Treasury zero-coupon yield curve in
effect at the time of grant. Both expected volatility and the
risk-free rate are based on a period commensurate with the
expected option term. The expected dividend yield is based on
the current dividend, the current market price of our common
stock and historical dividend yields.
The following table presents the weighted-average per share fair
value of options granted and the weighted-average assumptions
used, based on a Black-Scholes option-pricing model:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
2008
|
|
Per share fair value of options
|
|
$
|
9.73
|
|
|
$
|
8.03
|
|
|
$
|
9.13
|
|
Expected dividend yield
|
|
|
2.10
|
%
|
|
|
2.00
|
%
|
|
|
1.70
|
%
|
Expected volatility
|
|
|
45.86
|
%
|
|
|
32.62
|
%
|
|
|
26.81
|
%
|
Risk-free interest rate
|
|
|
1.81
|
%
|
|
|
2.97
|
%
|
|
|
5.01
|
%
|
Expected term (in years)
|
|
|
3.4
|
|
|
|
3.5
|
|
|
|
3.9
|
|
66
Bob Evans
Farms, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements
(Continued)
The following table summarizes option-related activity for
fiscal 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
Shares
|
|
|
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Subject to
|
|
|
Weighted-Average
|
|
|
Contractual
|
|
|
Intrinsic
|
|
Options
|
|
Options
|
|
|
Exercise Price
|
|
|
Term
|
|
|
Value
|
|
|
Outstanding, April 24, 2009
|
|
|
1,384,841
|
|
|
$
|
27.72
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
198,965
|
|
|
|
32.30
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(170,475
|
)
|
|
|
21.05
|
|
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
(9,868
|
)
|
|
|
27.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, April 30, 2010
|
|
|
1,403,463
|
|
|
$
|
29.21
|
|
|
|
4.65
|
|
|
$
|
3,683
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest, April 30, 2010
|
|
|
1,403,463
|
|
|
$
|
29.21
|
|
|
|
4.65
|
|
|
$
|
3,683
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, April 30, 2010
|
|
|
1,087,146
|
|
|
$
|
28.29
|
|
|
|
3.62
|
|
|
$
|
3,448
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of April 30, 2010, there was $1,010 of unrecognized
compensation cost related to nonvested stock options. That cost
is expected to be recognized over a weighted-average period of
1.67 years. The total intrinsic value of options exercised
during fiscal 2010, fiscal 2009 and fiscal 2008 was $1,644;
$785; and $3,512, respectively. Cash received from the exercise
of options was $3,588; $1,755; and $6,988 for fiscal 2010,
fiscal 2009 and fiscal 2008, respectively. The actual tax
benefit realized for tax deductions from the exercise of options
totaled $417; $208; and $954 for fiscal 2010, fiscal 2009 and
fiscal 2008, respectively.
Cash flows resulting from the tax benefits of tax deductions in
excess of the compensation cost recognized for those options
(excess tax benefits) are classified as financing cash flows. In
fiscal 2010, fiscal 2009 and fiscal 2008, excess tax benefits of
$375; $340; and $1,149, respectively, were classified as
financing cash flows in the Consolidated Statements of Cash
Flows.
In addition, to the shares subject to outstanding options,
approximately 1,225,000 shares were available for grant
under the 2006 Plan at April 30, 2010.
A summary of the status of our nonvested restricted shares as of
April 30, 2010, and changes during fiscal 2010 is presented
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
Grant Date Fair
|
|
Restricted Stock Awards
|
|
Shares
|
|
|
Value
|
|
|
Nonvested, April 24, 2009
|
|
|
381,851
|
|
|
$
|
30.60
|
|
Granted
|
|
|
239,166
|
|
|
|
31.67
|
|
Vested
|
|
|
(231,371
|
)
|
|
|
29.85
|
|
Forfeited
|
|
|
(15,080
|
)
|
|
|
31.29
|
|
|
|
|
|
|
|
|
|
|
Nonvested, April 30, 2010
|
|
|
374,566
|
|
|
$
|
31.73
|
|
|
|
|
|
|
|
|
|
|
At April 30, 2010, there was $5,824 of unrecognized
compensation cost related to nonvested restricted shares. This
cost is expected to be recognized over a weighted-average period
of 2.94 years. The total fair value of shares that vested
during fiscal 2010, fiscal 2009 and fiscal 2008 was $7,004;
$6,880; and $6,311, respectively.
|
|
Note E
|
Other
Compensation Plans
|
We have a defined contribution plan (401(k)) that is available
to substantially all employees who have at least
1,000 hours of service. We also have a nonqualified
deferred compensation plan, the Bob Evans Executive Deferral
Plan (BEEDP), which provides certain executives the
opportunity to defer a portion of their current income to future
years. Our annual matching contributions to the plans are at the
discretion of our Board of Directors.
67
Bob Evans
Farms, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements
(Continued)
Expenses related to matching contributions to these plans in
fiscal 2010, fiscal 2009 and fiscal 2008 were $4,738; $5,089;
and $4,910, respectively.
The SERP (see Note D) provides awards in the form of
nonqualified deferred cash compensation. Our expense related to
cash contributions to the SERP was $1,751; $285; and $745 in
fiscal 2010, fiscal 2009 and fiscal 2008, respectively.
|
|
Note F
|
Commitments
and Contingencies
|
We rent certain restaurant facilities under operating leases
having initial terms that primarily expire approximately
20 years from inception. The leases typically contain
renewal clauses of 5 to 30 years exercisable at our option.
Certain of these leases require the payment of contingent
rentals based on a percentage of gross revenues, as defined by
the terms of the applicable lease agreement. Most of the leases
also contain either fixed or inflation-adjusted escalation
clauses. Future minimum rental payments on operating leases are
as follows:
|
|
|
|
|
2011
|
|
$
|
24,163
|
|
2012
|
|
|
23,594
|
|
2013
|
|
|
23,080
|
|
2014
|
|
|
22,283
|
|
2015
|
|
|
21,135
|
|
Thereafter
|
|
|
193,891
|
|
|
|
|
|
|
Total
|
|
$
|
308,146
|
|
|
|
|
|
|
At April 30, 2010, we had contractual commitments of
approximately $47,038 for purchases of inventory and land,
restaurant construction and plant equipment additions.
We are self-insured for most casualty losses and employee
health-care claims up to certain stop-loss limits per claim. We
have accounted for liabilities for casualty losses, including
both reported claims and incurred but not reported claims, based
on information provided by independent actuaries. We have
accounted for our employee health-care claims liability through
a review of incurred and paid claims history.
We do not believe that our calculation of casualty losses and
employee health-care claims liabilities would change materially
under different conditions
and/or
different methods. However, due to the inherent volatility of
actuarially determined casualty losses and employee health-care
claims, it is reasonably possible that we could experience
changes in estimated losses, which could be material to both
quarterly and annual net income.
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 alleges 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 seeks 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 preliminary approval of a settlement in
the amount of $1,030,000
68
Bob Evans
Farms, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements
(Continued)
in January 2010. We recently completed the administration of
claims, and the Orange County California Superior Court granted
final approval of the settlement on June 10, 2010.
On October 13, 2009, a class action complaint entitled
Edder Diaz and Rosolyn Gray, et al. v. SWH Corporation
d/b/a Mimis Café was filed in Alameda County
California Superior Court. Mr. Diaz and Ms. Gray
purport to represent a class of various nonexempt employees,
including bartenders, hosts and servers, who are allegedly
similarly situated. The case involves claims that current and
former nonexempt employees working in these positions in
California from October 2005 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.
|
|
Note G
|
Goodwill
and Other Intangible Assets
|
At the beginning of the fourth quarter, we complete our annual
impairment test required under the provisions of the
Intangibles Goodwill and Other Topic of the FASB
ASC. In addition, we are required to assess the carrying value
of our goodwill and other intangible assets annually or whenever
circumstances indicate that a decline in value may have
occurred. Based on our stock valuation relative to our book
value, a scaled-back development plan for Mimis and
continued declining same-store sales at Mimis, we
determined that indicators of potential impairment were present
during the third quarter of fiscal 2009. As a result, during the
third quarter of fiscal 2009, we performed interim impairment
tests of goodwill and intangible assets.
The results of the fiscal 2009 impairment test indicated that
the carrying value of Mimis goodwill was fully impaired.
Therefore, we recorded a pretax goodwill impairment charge in
the restaurant segment in the third quarter of fiscal 2009 of
$56,162, which is included in Goodwill and other
intangibles impairment in the Consolidated Statements of
Income. The fair value of the Mimis reporting unit was
estimated based on a discounted cash flow model using our
business plans and projections for Mimis as the basis for
expected future cash flows. We believe the assumptions used for
the impairment test are consistent with those that a market
participant would use. There were no goodwill impairment charges
in fiscal 2010 or fiscal 2008.
Goodwill is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restaurant
|
|
|
Food Products
|
|
|
|
|
|
|
Segment
|
|
|
Segment
|
|
|
Total
|
|
|
April 25, 2008, carrying amount
|
|
$
|
56,162
|
|
|
$
|
1,567
|
|
|
$
|
57,729
|
|
Impairment in 2009
|
|
|
(56,162
|
)
|
|
|
0
|
|
|
|
(56,162
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2010, and April 24, 2009, carrying
amount
|
|
$
|
0
|
|
|
$
|
1,567
|
|
|
$
|
1,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets consist of the Mimis restaurant concept
that is amortized over a
15-year life
and the Mimis business trade name that is not amortized.
In the third quarter of fiscal 2009, we determined that the
other intangible assets were potentially impaired based on the
indicators discussed above. Based upon the impairment tests
performed at that time, we determined that the business trade
name had a fair value of $34,000, compared to a
69
Bob Evans
Farms, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements
(Continued)
carrying value of $45,800. This resulted in a pretax impairment
charge of $11,800, which is included in Goodwill and other
intangibles impairment in the Consolidated Statements of
Income. The fair value of the business trade name was estimated
using the relief-from-royalty method, an income approach to
valuation. We also reviewed the restaurant concept for
impairment. The estimated fair value of the restaurant concept,
calculated using a relief-from-royalty method, exceeded its
carrying value. Therefore, no impairment charge was recorded
related to the Mimis restaurant concept. There were no
restaurant concept or business trade name impairment charges in
fiscal 2010 or fiscal 2008.
Intangible assets are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restaurant
|
|
|
Business
|
|
|
|
|
|
|
Concept
|
|
|
Trade Name
|
|
|
Total
|
|
|
April 30, 2010, gross carrying amount
|
|
$
|
12,300
|
|
|
$
|
34,000
|
|
|
$
|
46,300
|
|
Accumulated amortization
|
|
|
(4,783
|
)
|
|
|
0
|
|
|
|
(4,783
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2010, net carrying amount
|
|
$
|
7,517
|
|
|
$
|
34,000
|
|
|
$
|
41,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 24, 2009, gross carrying amount
|
|
$
|
12,300
|
|
|
$
|
34,000
|
|
|
$
|
46,300
|
|
Accumulated amortization
|
|
|
(3,963
|
)
|
|
|
0
|
|
|
|
(3,963
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 24, 2009, net carrying amount
|
|
$
|
8,337
|
|
|
$
|
34,000
|
|
|
$
|
42,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amortization expense related to these intangible assets was
$820 in each fiscal 2010, fiscal 2009 and fiscal 2008.
Amortization expense related to intangible assets for the next
five years is expected to be $820 each year.
|
|
Note H
|
Quarterly
Financial Data (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Net sales
|
|
$
|
429,480
|
|
|
$
|
440,287
|
|
|
$
|
424,847
|
|
|
$
|
435,455
|
|
|
$
|
429,823
|
|
|
$
|
443,773
|
|
|
$
|
442,654
|
|
|
$
|
430,997
|
|
Gross profit (loss)
|
|
|
25,139
|
|
|
|
23,520
|
|
|
|
24,907
|
|
|
|
20,282
|
|
|
|
28,393
|
|
|
|
(46,434
|
)
|
|
|
27,975
|
|
|
|
30,999
|
|
Net income (loss)
|
|
|
16,115
|
|
|
|
13,809
|
|
|
|
15,482
|
|
|
|
11,339
|
|
|
|
17,967
|
|
|
|
(51,368
|
)
|
|
|
20,764
|
|
|
|
21,074
|
|
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.52
|
|
|
$
|
0.45
|
|
|
$
|
0.50
|
|
|
$
|
0.37
|
|
|
$
|
0.58
|
|
|
$
|
(1.67
|
)
|
|
$
|
0.68
|
|
|
$
|
0.69
|
|
Diluted
|
|
|
0.52
|
|
|
|
0.45
|
|
|
|
0.50
|
|
|
|
0.37
|
|
|
|
0.58
|
|
|
|
(1.67
|
)
|
|
|
0.68
|
|
|
|
0.69
|
|
Common stock sale prices:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
32.51
|
|
|
$
|
34.70
|
|
|
$
|
29.53
|
|
|
$
|
33.19
|
|
|
$
|
29.94
|
|
|
$
|
22.00
|
|
|
$
|
33.61
|
|
|
$
|
25.97
|
|
Low
|
|
|
23.38
|
|
|
|
25.90
|
|
|
|
24.81
|
|
|
|
18.32
|
|
|
|
25.00
|
|
|
|
12.51
|
|
|
|
27.25
|
|
|
|
16.14
|
|
Cash dividends paid
|
|
$
|
0.16
|
|
|
$
|
0.14
|
|
|
$
|
0.16
|
|
|
$
|
0.16
|
|
|
$
|
0.18
|
|
|
$
|
0.16
|
|
|
$
|
0.18
|
|
|
$
|
0.16
|
|
|
|
|
|
|
Gross profit represents operating income.
|
|
|
|
The fourth quarter of fiscal 2010 is comprised of a 14-week
period; all other fiscal quarters presented are comprised of a
13-week period.
|
|
|
|
Total quarterly earnings per share may not equal the annual
amount because earnings per share are calculated independently
for each quarter.
|
|
|
|
Stock prices are high and low sale prices for our common stock
as reported on the NASDAQ Stock Market (trading
symbol BOBE), which is the principal market for our
common stock.
|
|
|
|
The number of registered stockholders of our common stock at
June 25, 2010, was 22,659.
|
70
Bob Evans
Farms, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements
(Continued)
|
|
Note I
|
Industry
Segments
|
Our operations include restaurant operations and the processing
and sale of food products. The revenues from these segments
include both net sales to unaffiliated customers and
intersegment net sales, which are accounted for on a basis
consistent with net sales to unaffiliated customers.
Intersegment net sales and other intersegment transactions have
been eliminated in the consolidated financial statements.
Operating income represents earnings before interest and income
taxes. Identifiable assets by segment are those assets that are
used in our operations in each segment. General corporate assets
consist of cash equivalents, long-term investments and deferred
income tax assets.
Information on our industry segments is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Restaurant operations
|
|
$
|
1,411,092
|
|
|
$
|
1,439,090
|
|
|
$
|
1,445,034
|
|
Food products
|
|
|
351,891
|
|
|
|
349,273
|
|
|
|
331,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,762,983
|
|
|
|
1,788,363
|
|
|
|
1,776,094
|
|
Intersegment net sales of food products
|
|
|
(36,179
|
)
|
|
|
(37,851
|
)
|
|
|
(39,068
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,726,804
|
|
|
$
|
1,750,512
|
|
|
$
|
1,737,026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
|
|
|
|
|
|
|
|
|
|
|
Restaurant operations
|
|
$
|
85,144
|
|
|
$
|
12,796
|
|
|
$
|
78,686
|
|
Food products
|
|
|
21,270
|
|
|
|
15,571
|
|
|
|
28,554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
106,414
|
|
|
$
|
28,367
|
|
|
$
|
107,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Restaurant operations
|
|
$
|
74,436
|
|
|
$
|
73,877
|
|
|
$
|
69,195
|
|
Food products
|
|
|
9,552
|
|
|
|
8,057
|
|
|
|
7,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
83,988
|
|
|
$
|
81,934
|
|
|
$
|
77,131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
Restaurant operations
|
|
$
|
33,355
|
|
|
$
|
75,784
|
|
|
$
|
103,078
|
|
Food products
|
|
|
17,911
|
|
|
|
20,201
|
|
|
|
17,877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
51,266
|
|
|
$
|
95,985
|
|
|
$
|
120,955
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identifiable Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Restaurant operations
|
|
$
|
958,311
|
|
|
$
|
1,020,298
|
|
|
$
|
1,088,641
|
|
Food products
|
|
|
116,639
|
|
|
|
116,729
|
|
|
|
102,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,074,950
|
|
|
|
1,137,027
|
|
|
|
1,191,509
|
|
General corporate assets
|
|
|
34,207
|
|
|
|
27,148
|
|
|
|
30,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,109,157
|
|
|
$
|
1,164,175
|
|
|
$
|
1,221,907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71
|
|
Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
|
None.
|
|
Item 9A.
|
Controls
and Procedures
|
Evaluation
of Disclosure Controls and Procedures
Our management, with the participation of our Chairman of the
Board and Chief Executive Officer (principal executive officer)
and Chief Financial Officer, Treasurer and Secretary (principal
financial officer), has 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 Annual
Report on
Form 10-K.
Based upon that evaluation, our Chairman of the Board and Chief
Executive Officer and Chief Financial Officer, Treasurer and
Secretary have concluded that:
|
|
|
|
|
information required to be disclosed by us in this Annual Report
on
Form 10-K
and the other reports that we file or submit under the Exchange
Act would be accumulated and communicated to our management,
including our principal executive officer and principal
financial officer, as appropriate to allow timely decisions
regarding required disclosure;
|
|
|
|
information required to be disclosed by us in this Annual Report
on
Form 10-K
and the other reports that we file or submit under the Exchange
Act would be recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange
Commissions rules and forms; and
|
|
|
|
our disclosure controls and procedures are effective as of the
end of the period covered by this Annual Report on
Form 10-K
to ensure that material information relating to us and our
consolidated subsidiaries is made known to them, particularly
during the period for which our periodic reports, including this
Annual Report on Form
10-K, are
being prepared.
|
Managements
Annual Report on Internal Control Over Financial
Reporting
Managements Report on Internal Control Over Financial
Reporting is set forth in Item 8 of this Annual Report on
Form 10-K.
Report of
Independent Registered Public Accounting Firm on Internal
Control Over Financial Reporting
The Report of Independent Registered Public Accounting Firm on
Internal Control Over Financial Reporting is set forth in
Item 8 of this Annual Report on
Form 10-K.
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) that occurred during the fiscal quarter
ended April 30, 2010, that have materially affected, or are
reasonably likely to materially affect, our internal control
over financial reporting.
|
|
Item 9B.
|
Other
Information
|
None.
PART III
|
|
Item 10.
|
Directors,
Executive Officers and Corporate Governance
|
The information contained in our definitive proxy statement
relating to the annual meeting of stockholders to be held on
September 13, 2010 (the 2010 Proxy Statement),
under SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE, PROPOSAL 1: ELECTION OF
DIRECTORS, and CORPORATE GOVERNANCE under the
subcaption Directors Serving on Boards of Other Public
Companies is incorporated herein by reference.
The information regarding our executive officers required by
Item 401 of
Regulation S-K
is included in Part I of this
Form 10-K
under the caption Supplemental Item Executive
Officers of Bob Evans Farms, Inc.
72
Information concerning our Audit Committee and the determination
by our Board of Directors that at least one member of the Audit
Committee qualifies as an audit committee financial
expert is incorporated herein by reference to the
information contained in our 2010 Proxy Statement under
CORPORATE GOVERNANCE under the subcaptions
Board Committees and Charters and Board
Committees and Charters Audit Committee.
Information regarding the procedures by which our stockholders
may recommend nominees to our Board of Directors is incorporated
by reference to the information contained in our 2010 Proxy
Statement under CORPORATE GOVERNANCE under the
subcaption Board Committees and Charters
Nominating and Corporate Governance Committee.
Our Board of Directors has adopted a Code of Conduct that
applies to all directors, officers and employees, including our
principal executive officer, principal financial officer and
controller. The Code of Conduct is available at www.bobevans.com
in the Investors section under Corporate
Governance. To receive a copy of the Code of Conduct at no
cost, contact our Human Resources Department at
(877) 789-2623
or
(800) 272-7675.
We intend to satisfy the disclosure requirements under
Item 5.05 of
Form 8-K
regarding amendments to, or waivers from, certain provisions of
the Code of Conduct that apply to our principal executive
officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
by posting such information on our Web site.
Set forth below is a list of our directors, and their principal
occupations, as of June 25, 2010:
|
|
|
Name
|
|
Principal Occupation
|
|
Larry C. Corbin
|
|
Retired Interim Chief Executive Officer and President of Bob
Evans Farms, Inc.
|
Steven A. Davis
|
|
Chairman of the Board and Chief Executive Officer of Bob Evans
Farms, Inc.
|
Michael J. Gasser
|
|
Chairman of the Board, Chief Executive Officer and President of
Greif, Inc., a manufacturer of shipping containers and
containerboard, Delaware, Ohio
|
Dr. E. Gordon Gee
|
|
President of The Ohio State University
|
E.W. (Bill) Ingram III
|
|
President and Chief Executive Officer of White Castle System,
Inc., a quick-service hamburger chain, Columbus, Ohio
|
Cheryl L. Krueger
|
|
Chief Executive Officer of Krueger & Co., a strategic
business consulting company, Columbus, Ohio
|
G. Robert Lucas II
|
|
Trustee of The Jeffrey Trusts, trusts for the descendants of
Joseph A. Jeffrey, Columbus, Ohio
|
Eileen A. Mallesch
|
|
Retired; Senior Vice President, Chief Financial Officer:
Nationwide Property & Casualty Insurance, Nationwide
Insurance, Columbus, Ohio
|
Bryan G. Stockton
|
|
President International of Mattel, Inc., an
international toy company, El Segundo, California
|
Paul S. Williams
|
|
Partner, Major, Lindsey and Africa, a legal executive search
firm, Chicago, Illinois
|
|
|
Item 11.
|
Executive
Compensation
|
Information regarding the compensation of our Board of Directors
is incorporated by reference to the information contained in our
2010 Proxy Statement under CORPORATE GOVERNANCE
under the subcaption Director Compensation for Fiscal
2010.
Information regarding the compensation of our executive officers
is incorporated by reference to the information contained in our
2010 Proxy Statement under COMPENSATION DISCUSSION AND
ANALYSIS, COMPENSATION COMMITTEE REPORT and
EXECUTIVE COMPENSATION (including the information
appearing under the subcaptions Summary Compensation Table
for Fiscal 2010, 2009 and 2008, All Other
Compensation Table for Fiscal 2010, Grants of
Plan-Based Awards in Fiscal 2010, Outstanding Equity
Awards at 2010 Fiscal Year-End, Option Exercises and
Stock Vested in Fiscal 2010, Nonqualified Deferred
Compensation, Nonqualified Deferred Compensation
Table for Fiscal 2010, Change in Control
Arrangements, Employment Agreement
Steven Davis and Potential Payouts upon Termination
or
Change-in-Control).
73
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
Stock
Ownership of Certain Beneficial Owners and Management
The information required by Item 403 of
Regulation S-K
regarding the security ownership of certain beneficial owners
and management is incorporated herein by reference to the
information contained in the 2010 Proxy Statement under
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Equity
Compensation Plan Information
In September 2006, our stockholders approved the Bob Evans
Farms, Inc. 2006 Equity and Cash Incentive Plan (as amended, the
2006 Plan). Currently, the 2006 Plan is the only
plan under which we may issue equity securities to our
directors, officers and employees. As of April 30, 2010, a
number of awards were outstanding under the 2006 Plan and our
previous equity plans, including:
|
|
|
|
|
the Bob Evans Farms, Inc. Second Amended and Restated 1992
Nonqualified Stock Option Plan (the 1992 Stock Option
Plan);
|
|
|
|
the Bob Evans Farms, Inc. First Amended and Restated 1993 Long
Term Incentive Plan for Managers (the 1993 LTIP);
|
|
|
|
the Bob Evans Farms, Inc. First Amended and Restated 1994 Long
Term Incentive Plan (the 1994 LTIP); and
|
|
|
|
the Bob Evans Farms, Inc. Second Amended and Restated 1998 Stock
Option and Incentive Plan (the 1998 Stock Option
Plan).
|
Our stockholders approved all of our previous equity plans.
These plans were terminated as to new awards when our
stockholders adopted the 2006 Plan. Any shares that were
available for issuance under our previous equity plans at the
time they were terminated became available for issuance under
the 2006 Plan.
The following table shows, as of April 30, 2010, the number
of shares of common stock issuable upon exercise of outstanding
options, the weighted-average exercise price of those options
and the number of shares of common stock remaining for future
issuance under the 2006 Plan, excluding shares issuable upon
exercise of outstanding options.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
Number of
|
|
|
|
|
|
Remaining Available for
|
|
|
|
Securities to be
|
|
|
Weighted-Average
|
|
|
Future Issuance Under
|
|
|
|
Issued Upon
|
|
|
Exercise Price of
|
|
|
Equity Compensation
|
|
|
|
Exercise of
|
|
|
Outstanding
|
|
|
Plans (Excluding
|
|
|
|
Options, Warrants
|
|
|
Options, Warrants
|
|
|
Securities
|
|
Plan category
|
|
and Rights
|
|
|
and Rights
|
|
|
Reflected in Column (a))
|
|
|
Equity compensation plans approved by security holders
|
|
|
1,403,463
|
(1)
|
|
$
|
29.21
|
|
|
|
1,225,157
|
(2)
|
Equity compensation plans not approved by security holders
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,403,463
|
|
|
$
|
29.21
|
|
|
|
1,225,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,406 common shares issuable upon exercise of options granted
under the 1992 Stock Option Plan; |
|
|
|
2,552 common shares issuable upon exercise of options granted
under the 1994 LTIP; |
|
|
|
935,106 common shares issuable upon exercise of options granted
under the 1998 Stock Option Plan; and |
|
|
|
439,399 common shares issuable upon exercise of options granted
under the 2006 Plan. |
74
|
|
|
(2) |
|
Represents shares available for issuance under the 2006 Plan,
including 1,114,76 shares that were made available for
issuance under the 2006 Plan when the 1992 Stock Option Plan,
1993 LTIP and 1998 Stock Option Plan were terminated, as well as
shares that became available for issuance under the 2006 Plan
when outstanding awards under the 1992 Stock Option Plan, 1993
LTIP and 1998 Stock Option Plan expired or were otherwise
forfeited. Shares available for future issuance under the 2006
Plan may be granted in the form of incentive stock options,
nonqualified stock options, performance shares, performance
units, restricted stock, restricted stock units, stock
appreciation rights or whole shares. |
In addition, as of April 30, 2010, there were
374,566 shares of restricted stock outstanding, consisting
of 89,736 shares granted under the 1993 LTIP, 0 shares
granted under the 1998 Stock Option Plan and 284,830 shares
granted under the 2006 Plan.
|
|
Item 13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
The information contained in the 2010 Proxy Statement under the
captions TRANSACTIONS WITH RELATED PERSONS and
CORPORATE GOVERNANCE under the subcaption
Director Independence is incorporated herein by
reference.
|
|
Item 14.
|
Principal
Accountant Fees and Services
|
The information contained in the 2010 Proxy Statement under
PROPOSAL 4: RATIFICATION OF SELECTION OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM under the subcaptions
Preapproval of Services Performed by the Independent
Registered Public Accounting Firm and Fees of the
Independent Registered Public Accounting Firm is
incorporated herein by reference.
PART IV
|
|
Item 15.
|
Exhibits
and Financial Statement Schedules
|
(a)(1) Financial Statements
The following consolidated financial statements of Bob Evans
Farms, Inc. and subsidiaries are filed as part of this Annual
Report on Form
10-K under
Item 8 hereof:
|
|
|
|
|
Managements Report on Internal Control Over Financial
Reporting
|
|
|
|
Report of Independent Registered Public Accounting Firm on
Internal Control Over Financial Reporting
|
|
|
|
Report of Independent Registered Public Accounting Firm on
Consolidated Financial Statements
|
|
|
|
Consolidated Balance Sheets at April 30, 2010 and
April 24, 2009
|
|
|
|
Consolidated Statements of Income for the fiscal years ended
April 30, 2010, April 24, 2009 and April 25, 2008
|
|
|
|
Consolidated Statements of Stockholders Equity for the
fiscal years ended April 30, 2010, April 24, 2009 and
April 25, 2008
|
|
|
|
Consolidated Statements of Cash Flows for the fiscal years ended
April 30, 2010, April 24, 2009 and April 25, 2008
|
|
|
|
Notes to Consolidated Financial Statements
|
75
(a)(2) Financial Statement Schedules
Financial statement schedules have been omitted because they are
not required or are not applicable or because the information
required to be set forth therein either is not material or is
included in the financial statements or notes thereto.
(a)(3) Exhibits
The accompanying Index to Exhibits is filed as part of this
Annual Report on
Form 10-K.
Management contracts or compensatory plans or arrangements
required to be filed as exhibits to this Annual Report on
Form 10-K
are denoted by asterisk in the Index to Exhibits.
(b) Exhibits
The accompanying Index to Exhibits is filed as part of this
Annual Report on
Form 10-K.
(c) Financial Statement Schedules
Not applicable.
76
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) the
Securities Exchange Act of 1934, Bob Evans Farms, Inc. has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BOB EVANS FARMS, INC.
|
|
|
June 28, 2010
|
|
By: /s/ Tod P. Spornhauer
Tod
P. Spornhauer
Chief Financial Officer, Treasurer
and Assistant Secretary (principal financial
officer and principal accounting officer)
|
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Steven
A. Davis
Steven
A. Davis
|
|
Chairman of the Board and Chief Executive Officer (principal
executive officer)
|
|
June 28, 2010
|
|
|
|
|
|
*
Larry
C. Corbin
|
|
Director
|
|
June 28, 2010
|
|
|
|
|
|
*
Michael
J. Gasser
|
|
Director
|
|
June 28, 2010
|
|
|
|
|
|
*
Dr. E.
Gordon Gee
|
|
Director
|
|
June 28, 2010
|
|
|
|
|
|
*
E.W.
(Bill) Ingram III
|
|
Director
|
|
June 28, 2010
|
|
|
|
|
|
*
Cheryl
L. Krueger
|
|
Director
|
|
June 28, 2010
|
|
|
|
|
|
*
G.
Robert Lucas II
|
|
Director
|
|
June 28, 2010
|
|
|
|
|
|
*
Eileen
A. Mallesch
|
|
Director
|
|
June 28, 2010
|
|
|
|
|
|
*
Bryan
G. Stockton
|
|
Director
|
|
June 28, 2010
|
|
|
|
|
|
*
Paul
S. Williams
|
|
Director
|
|
June 28, 2010
|
|
|
|
* |
|
By Mary L. Garceau pursuant to Powers of Attorney executed by
the directors and executive officers listed above, which Powers
of Attorney have been filed with the Securities and Exchange
Commission. |
Mary L. Garceau
Vice President, General Counsel and
Corporate Secretary
77
BOB EVANS
FARMS, INC.
ANNUAL REPORT ON
FORM 10-K
FOR FISCAL YEAR ENDED APRIL 30, 2010
INDEX TO
EXHIBITS
|
|
|
|
|
|
|
Exhibit
|
|
|
|
|
Number
|
|
Description
|
|
Location
|
|
|
3
|
.1
|
|
Restated Certificate of Incorporation of company reflecting
amendments through Aug. 10, 1993. [This document
represents the Companys Certificate of Incorporation in
restated format incorporating all amendments. This compiled
document has not been filed with the Delaware Secretary of
State.]
|
|
Filed herewith
|
|
3
|
.2
|
|
Amended and Restated By-Laws of Bob Evans Farms, Inc. (As
amended November 19, 2008)
|
|
Incorporated herein by reference to Exhibit 3.1 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
filed November 24, 2008 (File
No. 0-1667)
|
|
4
|
.1
|
|
Note Purchase Agreement, dated as of July 28, 2004, by and among
Bob Evans Farms, Inc., BEF Holding Co., Inc. and the purchasers
of the notes set forth on the signature pages thereto
|
|
Incorporated herein by reference to Exhibit 4(a) to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
dated July 29, 2004 (File
No. 0-1667)
|
|
4
|
.2
|
|
Subsidiary Guaranty, dated as of July 28, 2004, by Mimis
Cafe, LLC
|
|
Incorporated herein by reference to Exhibit 4(b) to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
dated July 29, 2004 (File
No. 0-1667)
|
|
4
|
.3
|
|
First Amendment, dated as of January 15, 2005, to Note Purchase
Agreement, dated as of July 28, 2004, by and between Bob Evans
Farms, Inc. and the purchasers named therein
|
|
Incorporated herein by reference to Exhibit 4.3 to Bob
Evans Farms, Inc.s Annual Report on
Form 10-K
for its fiscal year ended April 24, 2009 (File
No. 0-1667)
|
|
4
|
.4
|
|
Second Amendment, dated as of February 24, 2009, to Note
Purchase Agreement, dated as of July 28, 2004, by and between
Bob Evans Farms, Inc. and the purchasers named therein
|
|
Incorporated herein by reference to Exhibit 4.2 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
filed March 2, 2009 (File
No. 0-1667)
|
|
4
|
.5
|
|
Note Purchase Agreement, dated July 28, 2008, by and among Bob
Evans Farms, Inc., BEF Holding Co., Inc. and the Purchases named
therein
|
|
Incorporated herein by reference to Exhibit 4.1 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
filed July 31, 2008 (File
No. 0-1667)
|
|
4
|
.6
|
|
Subsidiary Guaranty, dated as of July 28, 2008, by Mimis
Café, LLC
|
|
Incorporated herein by reference to Exhibit 4.2 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
filed July 31, 2008 (File
No. 0-1667)
|
|
4
|
.7
|
|
First Amendment, dated as of February 24, 2009, to Note Purchase
Agreement, dated as of July 28, 2008, by and between Bob Evans
Farms, Inc. and the Purchasers named therein
|
|
Incorporated herein by reference to Exhibit 4.1 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
filed March 2, 2009 (File
No. 0-1667)
|
|
10
|
.1
|
|
$45.0 Million Line of Credit Note from Bob Evans Farms, Inc. to
JPMorgan Chase Bank, N.A. dated as of December 1, 2009
|
|
Incorporated herein by reference to Exhibit 10.1 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
filed December 4, 2009 (File
No. 0-1667)
|
|
10
|
.2
|
|
Continuing Guaranty of Bob Evans Farms, Inc. to JPMorgan Chase
Bank, N.A. dated as of September 30, 2008
|
|
Incorporated herein by reference to Exhibit 10.2 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
filed October 6, 2008 (File
No. 0-1667)
|
|
10
|
.3
|
|
Reaffirmation to Guaranty of Bob Evans Farms, Inc. to JPMorgan
Chase Bank, N.A. dated as of December 1, 2009
|
|
Filed herewith
|
|
10
|
.4
|
|
Continuing Guaranty of Mimis Café, LLC to JPMorgan
Chase Bank, N.A. dated as of September 30, 2008
|
|
Incorporated herein by reference to Exhibit 10.3 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
filed October 6, 2008 (File
No. 0-1667)
|
|
|
|
|
|
|
|
Exhibit
|
|
|
|
|
Number
|
|
Description
|
|
Location
|
|
|
10
|
.5
|
|
Reaffirmation to Guaranty of Mimis Café, LLC to
JPMorgan Chase Bank, N.A. dated as of December 1, 2009
|
|
Filed herewith
|
|
10
|
.6
|
|
$75.0 Million Line of Credit Note from Bob Evans Farms, Inc. to
PNC Bank, National Association dated as of April 20, 2010
|
|
Incorporated herein by reference to Exhibit 10.1 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
filed April 22, 2010 (File
No. 0-1667)
|
|
10
|
.7
|
|
Parent Guaranty from Bob Evans Farms, Inc. to PNC Bank, National
Association dated as of April 20, 2010
|
|
Incorporated herein by reference to Exhibit 10.2 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
filed April 22, 2010 (File
No. 0-1667)
|
|
10
|
.8
|
|
Guaranty from Mimis Café, LLC to PNC Bank, National
Association dated as of April 20, 2010
|
|
Incorporated herein by reference to Exhibit 10.3 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
filed April 22, 2010 (File
No. 0-1667)
|
Amended and Restated Employment Agreement
|
|
|
|
|
|
|
|
|
*10
|
.9
|
|
Amended and Restated Employment Agreement, dated June 18, 2009,
by and between Bob Evans Farms, Inc. and Steven A. Davis
|
|
Incorporated herein by reference to Exhibit 10.3 to Bob
Evans Farms, Inc.s Annual Report on
Form 10-K
for its fiscal year ended April 24, 2009 (File
No. 0-1667)
|
|
*10
|
.10
|
|
Form of Bob Evans Farms, Inc. CEO Long-Term Performance-Based
Incentive Award Program Performance Share Award Agreement
|
|
Incorporated herein by reference to Exhibit 10.5 to Bob
Evans Farms, Inc.s Annual Report on
Form 10-K
for its fiscal year ended April 24, 2009 (File
No. 0-1667)
|
Change in Control Agreement
|
|
|
|
|
|
|
|
|
*10
|
.11
|
|
Form of Amended and Restated Change in Control Agreement between
Bob Evans Farms, Inc. and certain of its executive officers
|
|
Incorporated herein by reference to Exhibit 10.6 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
filed December 31, 2008 (File
No. 0-1667)
|
|
*10
|
.12
|
|
Amended and Restated Change in Control Agreement between Bob
Evans Farms, Inc. and Steven A. Davis, dated December 24, 2008
|
|
Incorporated herein by reference to Exhibit 10.7 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
filed December 31, 2008 (File
No. 0-1667)
|
1992 Nonqualified Stock Option Plan
|
|
|
|
|
|
|
|
|
*10
|
.13
|
|
Bob Evans Farms, Inc. 1992 Nonqualified Stock Option Plan
(effective for options granted prior to May 1, 2002)
|
|
Incorporated herein by reference to Exhibit 10(j) to Bob
Evans Farms, Inc.s Annual Report on
Form 10-K
for its fiscal year ended April 24, 1992 (File
No. 0-1667)
|
|
*10
|
.14
|
|
Bob Evans Farms, Inc. First Amended and Restated 1992
Nonqualified Stock Option Plan (effective for options granted
after May 1, 2002)
|
|
Incorporated herein by reference to Exhibit 10(o) to Bob
Evans Farms, Inc.s Annual Report on
Form 10-K
for its fiscal year ended April 26, 2002 (File
No. 0-1667)
|
|
*10
|
.15
|
|
Bob Evans Farms, Inc. Second Amended and Restated 1992
Nonqualified Stock Option Plan (effective as of November 14,
2007)
|
|
Incorporated herein by reference to Exhibit 10.1 to Bob
Evans Farms, Inc.s Quarterly Report on
Form 10-Q
for its fiscal quarter ended October 26, 2007 (File
No. 0-1667)
|
|
*10
|
.16
|
|
First Amendment to the Bob Evans Farms, Inc. Second Amended and
Restated 1992 Nonqualified Stock Option Plan effective November
18, 2008
|
|
Incorporated herein by reference to Exhibit 10.11 to Bob
Evans Farms, Inc.s Quarterly Report on
Form 10-Q
for its fiscal quarter ended March 4, 2009 (File
No. 0-1667)
|
1994 Long Term Incentive Plan
|
|
*10
|
.17
|
|
Bob Evans Farms, Inc. 1994 Long Term Incentive Plan (effective
for options and other awards granted prior to May 1, 2002)
|
|
Incorporated herein by reference to Exhibit 10(n) to Bob
Evans Farms, Inc.s Annual Report on
Form 10-K
for its fiscal year ended April 29, 1994 (File
No. 0-1667)
|
|
|
|
|
|
|
|
Exhibit
|
|
|
|
|
Number
|
|
Description
|
|
Location
|
|
|
*10
|
.18
|
|
Bob Evans Farms, Inc. First Amended and Restated 1994 Long Term
Incentive Plan (effective for options and other awards granted
after May 1, 2002)
|
|
Incorporated herein by reference to Exhibit 10(q) to Bob
Evans Farms, Inc.s Annual Report on
Form 10-K
for its fiscal year ended April 26, 2002 (File
No. 0-1667)
|
1998 Stock Option and Incentive Plan
|
|
|
|
|
|
|
|
|
*10
|
.19
|
|
Bob Evans Farms, Inc. 1998 Stock Option and Incentive Plan
(effective for options and other awards granted prior to May 1,
2002)
|
|
Incorporated herein by reference to Exhibit 4(f) to Bob
Evans Farms, Inc.s Registration Statement on
Form S-8
filed March 22, 1999 (Registration
No. 333-74829)
|
|
*10
|
.20
|
|
Bob Evans Farms, Inc. First Amended and Restated 1998 Stock
Option and Incentive Plan (effective for options and other
awards granted after May 1, 2002)
|
|
Incorporated herein by reference to Exhibit 10(s) to Bob
Evans Farms, Inc.s Annual Report on
Form 10-K
for its fiscal year ended April 26, 2002 (File
No. 0-1667)
|
|
*10
|
.21
|
|
Bob Evans Farms, Inc. Second Amended and Restated 1998 Stock
Option and Incentive Plan (effective as of January 1, 2008)
|
|
Incorporated herein by reference to Exhibit 10.6 to Bob
Evans Farms, Inc.s Quarterly Report on
Form 10-Q
for its fiscal quarter ended October 26, 2007 (File
No. 0-1667)
|
|
*10
|
.22
|
|
First Amendment to the Bob Evans Farms, Inc. Second Amended and
Restated 1998 Stock Option and Incentive Plan effective November
18, 2008
|
|
Incorporated herein by reference to Exhibit 10.12 to Bob
Evans Farms, Inc.s Quarterly Report on
Form 10-Q
for its fiscal quarter ended March 31, 2009 (File
No. 0-1667)
|
|
*10
|
.23
|
|
Form of Incentive Stock Option Notice and Agreement for the Bob
Evans Farms, Inc. First Amended and Restated 1998 Stock Option
and Incentive Plan
|
|
Filed herewith
|
|
*10
|
.24
|
|
Form of Nonqualified Stock Option Notice and Agreement for the
Bob Evans Farms, Inc. First Amended and Restated 1998 Stock
Option and Incentive Plan
|
|
Filed herewith
|
|
*10
|
.25
|
|
Form of Restricted Stock Award Notice and Agreement for the Bob
Evans Farms, Inc. First Amended and Restated 1998 Stock Option
and Incentive Plan
|
|
Filed herewith
|
|
*10
|
.26
|
|
Nonqualified Stock Option Notice and Agreement First
Amended and Restated 1998 Stock Option and Incentive Plan (for
awards on or after June 13, 2006)
|
|
Incorporated herein by reference to Exhibit 10.1 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
filed June 19, 2006 (File
No. 0-1667)
|
|
*10
|
.27
|
|
Incentive Stock Option Notice and Agreement First
Amended and Restated 1998 Stock Option and Incentive Plan (for
awards on or after June 13, 2006)
|
|
Incorporated herein by reference to Exhibit 10.2 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
filed June 19, 2006 (File
No. 0-1667)
|
|
*10
|
.28
|
|
Restricted Stock Award Notice and Agreement
(Director) First Amended and Restated 1998 Stock
Option and Incentive Plan (for awards on or after June 13, 2006)
|
|
Incorporated herein by reference to Exhibit 10.3 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
filed June 19, 2006 (File
No. 0-1667)
|
|
*10
|
.29
|
|
Restricted Stock Award Notice and Agreement
(Employee) First Amended and Restated 1998 Stock
Option and Incentive Plan (for awards on or after June 13, 2006)
|
|
Incorporated herein by reference to Exhibit 10.4 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
filed June 19, 2006 (File
No. 0-1667)
|
Executive Deferral Program
|
|
|
|
|
|
|
|
|
*10
|
.30
|
|
Bob Evans Farms, Inc. and Affiliates Fourth Amended and Restated
Executive Deferral Program
|
|
Incorporated herein by reference to Exhibit 10.1 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
filed June 2, 2010 (File
No. 0-1667)
|
|
|
|
|
|
|
|
Exhibit
|
|
|
|
|
Number
|
|
Description
|
|
Location
|
|
1998 Amended and Restated Supplemental Executive Retirement
Plan
|
|
|
|
|
|
|
|
|
*10
|
.31
|
|
Bob Evans Farms, Inc. 1998 Amended and Restated Supplemental
Executive Retirement Plan (effective as of May 1, 1998)
|
|
Filed herewith
|
|
*10
|
.32
|
|
Bob Evans Farms, Inc. and Affiliates 2002 Second Amended and
Restated Supplemental Executive Retirement Plan (effective as of
May 1, 2002)
|
|
Filed herewith
|
|
*10
|
.33
|
|
First Amendment to Bob Evans Farms, Inc. and Affiliates 2002
Second Amended and Restated Supplemental Executive Retirement
Plan
|
|
Incorporated herein by reference to Exhibit 10 to Bob Evans
Farms, Inc.s Quarterly Report on
Form 10-Q
for its fiscal quarter ended January 26, 2007 (File
No. 0-1667)
|
|
*10
|
.34
|
|
Amendment to Bob Evans Farms, Inc. and Affiliates 2002 Second
Amended and Restated Supplemental Executive Retirement Plan
(effective as of January 1, 2006)
|
|
Incorporated herein by reference to Exhibit 10.4 to Bob
Evans Farms, Inc.s Quarterly Report on
Form 10-Q
for its fiscal quarter ended October 26, 2007 (File
No. 0-1667)
|
|
*10
|
.35
|
|
Bob Evans Farms, Inc. and Affiliates Third Amended and Restated
Supplemental Executive Retirement Plan (effective as of January
1, 2008)
|
|
Incorporated herein by reference to Exhibit 10.5 to Bob
Evans Farms, Inc.s Quarterly Report on
Form 10-Q
for its fiscal quarter ended October 26, 2007 (File
No. 0-1667)
|
2002 Incentive Growth Plan
|
|
|
|
|
|
|
|
|
*10
|
.36
|
|
Bob Evans Farms, Inc. 2002 Incentive Growth Plan (effective
Sept. 9, 2002)
|
|
Filed herewith
|
|
*10
|
.37
|
|
Bob Evans Farms, Inc. Compensation Program for Directors
(Revised August 10, 2007)
|
|
Incorporated herein by reference to Exhibit 10 to Bob Evans
Farms, Inc.s Current Report on
Form 8-K
filed August 13, 2007 (File
No. 0-1667)
|
|
*10
|
.38
|
|
Cash Award Notice and Agreement Performance
Incentive Plan (for awards on or after June 13, 2006)
|
|
Incorporated herein by reference to Exhibit 10.5 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
filed June 19, 2006 (File
No. 0-1667)
|
|
*10
|
.39
|
|
Restricted Stock Award Notice and Agreement First
Amended and Restated 1993 Long Term Incentive Plan for Managers
(for awards on or after June 13, 2006)
|
|
Incorporated herein by reference to Exhibit 10.6 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
filed June 19, 2006 (File
No. 0-1667)
|
|
*10
|
.40
|
|
Bob Evans Farms, Inc. Performance Incentive Plan Notice of
Eligibility and Participation Agreement (for Tier 1 participants
who are not eligible to retire)
|
|
Incorporated herein by reference to Exhibit 10.1 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
filed June 15, 2007 (File
No. 0-1667)
|
|
*10
|
.41
|
|
Bob Evans Farms, Inc. Performance Incentive Plan Notice of
Eligibility and Participation Agreement (for Tier 1 participants
who are eligible to retire)
|
|
Incorporated herein by reference to Exhibit 10.2 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
filed June 15, 2007 (File
No. 0-1667)
|
|
*10
|
.42
|
|
Bob Evans Farms, Inc. Performance Incentive Plan Notice of
Eligibility and Participation Agreement (for Tier 2 participants
who are not eligible to retire)
|
|
Incorporated herein by reference to Exhibit 10.3 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
filed June 15, 2007 (File
No. 0-1667)
|
|
*10
|
.43
|
|
Bob Evans Farms, Inc. Performance Incentive Plan Notice of
Eligibility and Participation Agreement (for Tier 2 participants
who are eligible to retire)
|
|
Incorporated herein by reference to Exhibit 10.4 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
filed June 15, 2007 (File
No. 0-1667)
|
2006 Equity and Cash Incentive Plan
|
|
|
|
|
|
|
|
|
*10
|
.44
|
|
Bob Evans Farms, Inc. 2006 Equity and Cash Incentive Plan
|
|
Incorporated herein by reference to Exhibit 10 to Bob Evans
Farms, Inc.s Current Report on
Form 8-K
filed September 14, 2006 (File
No. 0-1667)
|
|
|
|
|
|
|
|
Exhibit
|
|
|
|
|
Number
|
|
Description
|
|
Location
|
|
|
*10
|
.45
|
|
Bob Evans Farms, Inc. Amended and Restated 2006 Equity and Cash
Incentive Plan (effective as of January 1, 2008)
|
|
Incorporated herein by reference to Exhibit 10.7 to Bob
Evans Farms, Inc.s Quarterly Report on
Form 10-Q
for its fiscal quarter ended October 26, 2007 (File
No. 0-1667)
|
|
*10
|
.46
|
|
First Amendment to the Bob Evans Farms, Inc. Amended and
Restated 2006 Equity and Cash Incentive Plan effective November
18, 2008
|
|
Incorporated herein by reference to Exhibit 10.13 to Bob
Evans Farms, Inc.s Quarterly Report on
Form 10-Q
for its fiscal quarter ended March 31, 2009 (File
No. 0-1667)
|
|
*10
|
.47
|
|
Form of Bob Evans Farms, Inc. 2006 Equity and Cash Incentive
Plan Incentive Stock Option Award Agreement (For
Employees Performance Incentive Plan Award)
|
|
Incorporated herein by reference to Exhibit 10.1 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
filed April 25, 2007 (File
No. 0-1667)
|
|
*10
|
.48
|
|
Form of Bob Evans Farms, Inc. 2006 Equity and Cash Incentive
Plan Nonqualified Stock Option Award Agreement (For
Employees Performance Incentive Plan Award)
|
|
Incorporated herein by reference to Exhibit 10.2 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
filed April 25, 2007 (File
No. 0-1667)
|
|
*10
|
.49
|
|
Form of Bob Evans Farms, Inc. 2006 Annual Bonus Award Agreement
(For Employees)
|
|
Incorporated herein by reference to Exhibit 10.7 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
filed April 25, 2007 (File
No. 0-1667)
|
|
*10
|
.50
|
|
Form of Bob Evans Farms, Inc. 2006 Equity and Cash Incentive
Plan Restricted Stock Award Agreement (For Employees
Performance Incentive Plan Award)
|
|
Incorporated herein by reference to Exhibit 10.1 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
filed May 17, 2007 (File
No. 0-1667)
|
|
*10
|
.51
|
|
Form of Bob Evans Farms, Inc. 2006 Equity and Cash Incentive
Plan Restricted Stock Award Agreement (For Non-Employee
Directors)
|
|
Incorporated herein by reference to Exhibit 10.2 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
filed May 17, 2007 (File
No. 0-1667)
|
|
*10
|
.52
|
|
Form of Bob Evans Farms, Inc. 2006 Equity and Cash Incentive
Plan Whole Share Award Agreement (For Employees
General)
|
|
Incorporated herein by reference to Exhibit 10.3 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
filed May 17, 2007 (File
No. 0-1667)
|
|
*10
|
.53
|
|
Form of Bob Evans Farms, Inc. 2006 Equity and Cash Incentive
Plan Whole Share Award Agreement (For Employees
Performance Incentive Plan Award)
|
|
Incorporated herein by reference to Exhibit 10.4 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
filed April 25, 2007 (File
No. 0-1667)
|
|
*10
|
.54
|
|
Form of Bob Evans Farms, Inc. 2006 Equity and Cash Incentive
Plan Whole Share Award Agreement (For Non-Employee Directors)
|
|
Incorporated herein by reference to Exhibit 10.5 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
filed May 17, 2007 (File
No. 0-1667)
|
|
*10
|
.55
|
|
Form of Bob Evans Farms, Inc. 2006 Equity and Cash Incentive
Plan Cash Based Award Agreement (For Employees
Performance Incentive Plan Award)
|
|
Incorporated herein by reference to Exhibit 10.5 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K/A
dated June 15, 2007 (File
No. 0-1667)
|
|
*10
|
.56
|
|
Bob Evans Farms, Inc. 2006 Equity and Cash Incentive Plan CEO
Long-Term Performance-Based Incentive Award Program (Terms and
Conditions for the Five-Year Performance Period from Fiscal Year
2010 through Fiscal Year 2014)
|
|
Incorporated herein by reference to Exhibit 10.4 to Bob
Evans Farms, Inc.s Annual Report on
Form 10-K
for its fiscal year ended April 24, 2009 (File
No. 0-1667)
|
Director Medical Reimbursement Program
|
|
|
|
|
|
|
|
|
*10
|
.57
|
|
Bob Evans Farms, Inc. Director Medical Reimbursement Program
effective as of January 1, 2008
|
|
Incorporated herein by reference to Exhibit 10.15 to Bob
Evans Farms, Inc.s Quarterly Report on
Form 10-Q
for its fiscal quarter ended March 31, 2009 (File
No. 0-1667)
|
|
|
|
|
|
|
|
Exhibit
|
|
|
|
|
Number
|
|
Description
|
|
Location
|
|
Executive Compensation Recoupment Policy
|
|
|
|
|
|
|
|
|
*10
|
.58
|
|
Bob Evans Farms, Inc. Executive Compensation Recoupment Policy
Adopted February 17, 2009
|
|
Incorporated herein by reference to Exhibit 10.1 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
dated June 12, 2009 (File
No. 0-1667)
|
|
*10
|
.59
|
|
Form of Executive Recoupment Policy Acknowledgement and Agreement
|
|
Incorporated herein by reference to Exhibit 10.2 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
dated June 12, 2009 (File
No. 0-1667)
|
2010 Director Deferral Program
|
|
|
|
|
|
|
|
|
*10
|
.60
|
|
Bob Evans Farms, Inc. 2010 Director Deferral Program
effective May 26, 2010
|
|
Incorporated herein by reference to Exhibit 10.2 to Bob
Evans Farms, Inc.s Current Report on
Form 8-K
filed June 2, 2010 (File
No. 0-1667)
|
|
21
|
|
|
Subsidiaries of Bob Evans Farms, Inc.
|
|
Filed herewith
|
|
23
|
|
|
Consent of Independent Registered Public Accounting Firm
|
|
Filed herewith
|
|
24
|
|
|
Powers of Attorney of Directors and Executive Officers
|
|
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
|
|
|
|
* |
|
Denotes management contract or compensatory plan or agreement. |