Attached files

file filename
EX-99.2 - EX-99.2 - BOB EVANS FARMS INCd385505dex992.htm
EX-10.1 - EX-10.1 - BOB EVANS FARMS INCd385505dex101.htm
8-K - 8-K - BOB EVANS FARMS INCd385505d8k.htm

Exhibit 99.1

BOB EVANS FARMS, INC.

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

On April 28, 2017, Bob Evans Farms, Inc., (the “Company”) completed the previously announced sale (the “Restaurants Transaction”) of the Bob Evans Restaurants Business (the “Restaurants Business”) to affiliates of Golden Gate Capital Opportunity Fund, L.P. (the “Buyer”), which included the sale of our corporate headquarters building, and resulted in the Company’s complete divestiture of its restaurant segment.

The following unaudited pro forma consolidated statement of net income for the nine month period ended January 27, 2017 and unaudited pro forma consolidated statements of net income for each of the years ended April 29, 2016, April 24, 2015 and April 25, 2014 are presented as if the Restaurants Transaction and related events had occurred on April 27, 2013, the first day of fiscal year 2014. The following unaudited pro forma condensed consolidated balance sheet as of January 27, 2017 is presented as if the Restaurants Transaction and related events had occurred on January 27, 2017.

The unaudited consolidated pro forma financial statements have been derived from historical financial statements prepared in accordance with U.S. generally accepted accounting principles (“US GAAP”) and are presented based on information currently available. They are intended for informational purposes only and are not intended to represent the Company’s financial position or results of operations had the Restaurants Transaction and related events occurred on the dates indicated, or to project the Company’s financial performance for any future period. Beginning in the third quarter of fiscal 2017, the historical financial results attributable to Bob Evans Restaurants for periods prior to the Restaurants Transaction were reflected in the Company’s consolidated statements of net income as discontinued operations.

The unaudited pro forma consolidated financial statements and the accompanying notes should be read in conjunction with the following: (i) the audited consolidated financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Form 10-K for the years ended April 29, 2016, April 24, 2015 and April 25, 2014 and (ii) the unaudited consolidated financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Form 10-Q for the third quarter and nine months ended January 27, 2017.

The unaudited pro forma consolidated financial statements include information, statements, and assumptions that are or may be considered “forward-looking” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by the use of words such as “may,” “should,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,” “believe,” “plan” or similar expressions. Statements that describe objectives, plans, or goals also are forward-looking statements. These forward-looking statements involve risks and uncertainties, and actual results may differ materially from those contemplated by the forward-looking statements due to, among others, the risks and uncertainties described under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended April 29, 2016. For any forward-looking statements contained herein, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and the Company undertakes no obligation to update publicly or revise any forward-looking statements in light of new information or future events.

 

1


BOB EVANS FARMS, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF NET INCOME

For the Nine Months Ended January 27, 2017

(in thousands, except per share amounts)

 

     Historical (a)     Pro Forma
Adjustments
    Pro Forma  

Net Sales

   $ 294,919     $ 16,846 (c)    $ 311,765  

Cost of sales

     127,171       15,835 (c)      143,006  

Operating wages and fringe benefit expenses

     31,132         31,132  

Other operating expenses

     44,372         44,372  

Selling, general and administrative expenses

     39,179         39,179  

Depreciation and amortization

     17,191         17,191  

Impairment

     15,256         15,256  
  

 

 

   

 

 

   

 

 

 

Operating Income

     20,618       1,011       21,629  

Interest income

     (1,369     —         (1,369

Interest expense

     6,330       (6,280 )(d)      50  
  

 

 

   

 

 

   

 

 

 

Net Interest Expense (Income)

     4,961       (6,280     (1,319

Income from Continuing Operations before Income Taxes

     15,657       7,291       22,948  

Provision for income taxes

     5,377       2,323 (e)      7,700  
  

 

 

   

 

 

   

 

 

 

Net Income from Continuing Operations

   $ 10,280     $ 4,968     $ 15,248  
  

 

 

   

 

 

   

 

 

 

Earnings Per Share - Continuing Operations

      

Basic

   $ 0.52       $ 0.77  

Diluted

   $ 0.51       $ 0.76  

Weighted Average Shares Outstanding

      

Basic Shares

     19,836         19,836  

Dilutive Shares

     219         219  
  

 

 

     

 

 

 

Diluted

     20,055         20,055  
  

 

 

     

 

 

 

The accompanying notes are an integral part of the unaudited pro forma financial statements.

 

2


BOB EVANS FARMS, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF NET INCOME

For the Year Ended April 29, 2016 - Fiscal 2016 (53 weeks)

(in thousands, except per share amounts)

 

     Historical (a)     Pro Forma
Adjustments
    Pro Forma  

Net Sales

   $ 1,338,827     $ (932,442 )(b)(c)    $ 406,385  

Cost of sales

     425,585       (234,969 )(b)(c)      190,616  

Operating wages and fringe benefit expenses

     427,148       (384,959 )(b)      42,189  

Other operating expenses

     222,060       (169,673 )(b)      52,387  

Selling, general and administrative expenses

     139,822       (73,873 )(b)      65,949  

Depreciation and amortization

     79,607       (58,562 )(b)      21,045  

Impairment

     8,384       (8,384 )(b)      —    
  

 

 

   

 

 

   

 

 

 

Operating Income

     36,221       (2,022     34,199  

Interest income

     (2,550     —         (2,550

Interest expense

     13,350       (13,275 )(d)      75  
  

 

 

   

 

 

   

 

 

 

Net Interest Expense (Income)

     10,800       (13,275     (2,475

Income from Continuing Operations before Income Taxes

     25,421       11,253       36,674  

Provision for income taxes

     1,199       9,748 (e)      10,947  
  

 

 

   

 

 

   

 

 

 

Net Income from Continuing Operations

   $ 24,222     $ 1,505     $ 25,727  
  

 

 

   

 

 

   

 

 

 

Earnings Per Share - Continuing Operations

      

Basic

   $ 1.14       $ 1.21  

Diluted

   $ 1.13       $ 1.20  

Weighted Average Shares Outstanding

      

Basic Shares

     21,336         21,336  

Dilutive Shares

     158         158  
  

 

 

     

 

 

 

Diluted

     21,494         21,494  
  

 

 

     

 

 

 

The accompanying notes are an integral part of the unaudited pro forma financial statements.

 

3


BOB EVANS FARMS, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF NET INCOME

For the Year Ended April 24, 2015 - Fiscal 2015

(in thousands, except per share amounts)

 

     Historical (a)     Pro Forma
Adjustments
    Pro Forma  

Net Sales

   $ 1,349,190     $ (950,574 )(b)(c)    $ 398,616  

Cost of sales

     457,744       (240,531 )(b)(c)      217,213  

Operating wages and fringe benefit expenses

     423,539       (381,822 )(b)      41,717  

Other operating expenses

     217,991       (168,610 )(b)      49,381  

Selling, general and administrative expenses

     143,295       (69,915 )(b)      73,380  

Depreciation and amortization

     80,074       (61,710 )(b)      18,364  

Impairment

     8,861       (6,100 )(b)      2,761  
  

 

 

   

 

 

   

 

 

 

Operating Income (Loss)

     17,686       (21,886     (4,200

Interest income

     (2,430     —         (2,430

Interest expense

     11,079       (11,001 )(d)      78  
  

 

 

   

 

 

   

 

 

 

Net Interest Expense (Income)

     8,649       (11,001     (2,352

Income (Loss) from Continuing Operations before Income Taxes

     9,037       (10,885     (1,848

(Benefit) for income taxes

     (7,516     6,834 (e)      (682
  

 

 

   

 

 

   

 

 

 

Net Income (Loss) from Continuing Operations

   $ 16,553     $ (17,719   $ (1,166
  

 

 

   

 

 

   

 

 

 

Earnings (Loss) Per Share - Continuing Operations

      

Basic

   $ 0.70       $ (0.05

Diluted

   $ 0.70       $ (0.05

Weighted Average Shares Outstanding

      

Basic Shares

     23,489         23,489  

Dilutive Shares

     160         160  
  

 

 

     

 

 

 

Diluted

     23,649         23,649  
  

 

 

     

 

 

 

The accompanying notes are an integral part of the unaudited pro forma financial statements.

 

4


BOB EVANS FARMS, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF NET INCOME

For the Year Ended April 25, 2014 - Fiscal 2014

(in thousands, except per share amounts)

 

     Historical (a)     Pro Forma
Adjustments
    Pro Forma  

Net Sales

   $ 1,328,552     $ (941,746 )(b)(c)    $ 386,806  

Cost of sales

     451,777       (230,929 )(b)(c)      220,848  

Operating wages and fringe benefit expenses

     406,307       (365,607 )(b)      40,700  

Other operating expenses

     218,904       (164,916 )(b)      53,988  

Selling, general and administrative expenses

     122,133       (60,589 )(b)      61,544  

Depreciation and amortization

     79,456       (63,666 )(b)      15,790  

Impairment

     16,850       (13,513 )(b)      3,337  
  

 

 

   

 

 

   

 

 

 

Operating Income (Loss)

     33,125       (42,526     (9,401

Interest income

     (2,651     —         (2,651

Interest expense

     4,665       (4,639 )(d)      26  
  

 

 

   

 

 

   

 

 

 

Net Interest Expense (Income)

     2,014       (4,639     (2,625

Income (Loss) from Continuing Operations before Income Taxes

     31,111       (37,887     (6,776

Provision (Benefit) for income taxes

     143       (2,738 )(e)      (2,595
  

 

 

   

 

 

   

 

 

 

Net Income (Loss) from Continuing Operations

   $ 30,968     $ (35,149   $ (4,181
  

 

 

   

 

 

   

 

 

 

Earnings (Loss) Per Share - Continuing Operations

      

Basic

   $ 1.17       $ (0.16

Diluted

   $ 1.16       $ (0.16

Weighted Average Shares Outstanding

      

Basic Shares

     26,450         26,450  

Dilutive Shares

     254         254  
  

 

 

     

 

 

 

Diluted

     26,704         26,704  
  

 

 

     

 

 

 

The accompanying notes are an integral part of the unaudited pro forma financial statements.

 

5


BOB EVANS FARMS, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

As of January 27, 2017

(in thousands, except par value amounts)

 

     Historical (a)     Pro Forma
Adjustments
    Pro Forma  
Assets       

Current Assets

      

Cash and equivalents

   $ 2,430     $ 199,554 (f)(i)    $ 201,984  

Accounts receivable, net

     29,258         29,258  

Inventories

     19,455         19,455  

Federal and state income taxes receivable

     9,338       (9,338 )(g)      —    

Prepaid expenses and other current assets

     3,967         3,967  

Current assets held for sale

     499,943       (496,609 )(h)      3,334  
  

 

 

   

 

 

   

 

 

 

Total Current Assets

     564,391       (306,393     257,998  

Net Property, Plant and Equipment

     133,350         133,350  

Deposits and other

     2,518       (2,196 )(i)      322  

Rabbi trust assets

     21,540         21,540  

Goodwill and other intangible assets

     19,712         19,712  

Non-current deferred tax assets

     24,878       (22,000 )(g)      2,878  
  

 

 

   

 

 

   

 

 

 

Total Other Assets

     68,648       (24,196     44,452  
  

 

 

   

 

 

   

 

 

 

Total Assets

   $ 766,389     $ (330,589   $ 435,800  
  

 

 

   

 

 

   

 

 

 
Liabilities and Stockholders’ Equity       

Current Liabilities

      

Current portion of long-term debt

   $ 3,425     $ (3,000 )(i)    $ 425  

Accounts payable

     14,941         14,941  

Accrued wages and related liabilities

     12,830         12,830  

Self-insurance reserves

     9,263         9,263  

Other current liabilities

     29,830       (10,157 )(h)      19,673  

Federal and state income taxes payable

     —         32,094 (g)      32,094  

Current liabilities held for sale

     128,764       (128,764 )(h)      —    
  

 

 

   

 

 

   

 

 

 

Total Current Liabilities

     199,053       (109,827     89,226  

Long-Term Liabilities

      

Deferred compensation

     18,147         18,147  

Other non-current liabilities

     5,565         5,565  

Credit facility borrowings and other long-term debt

     326,626       (324,256 )(i)      2,370  
  

 

 

   

 

 

   

 

 

 

Total Long-Term Liabilities

     350,338       (324,256     26,082  

Stockholders’ Equity

      

Common stock, $.01 par value; authorized 100,000 shares; issued 42,638 shares

     426         426  

Capital in excess of par value

     248,144         248,144  

Retained earnings

     829,356       103,494 (j)      932,850  

Treasury stock, 22,869 shares

     (860,928       (860,928
  

 

 

   

 

 

   

 

 

 

Total Stockholders’ Equity

     216,998       103,494       320,492  
  

 

 

   

 

 

   

 

 

 

Total Liabilities and Stockholders’ Equity

   $ 766,389     $ (330,589   $ 435,800  
  

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of the unaudited pro forma financial statements.

 

6


NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF NET INCOME

Note 1. Basis of Presentation

The Company’s historical consolidated financial statements have been adjusted in the unaudited consolidated pro forma financial statements to present events that are (i) directly attributable to the Restaurants Transaction, (ii) factually supportable and (iii) are expected to have a continuing impact on the Company’s consolidated results following the Restaurants Transaction. The pro forma consolidated statements of net income do not reflect the estimated gain on the sale of the Restaurants Business.

Note 2. Pro Forma Adjustments

The following adjustments have been reflected in the unaudited pro forma consolidated financial statements:

(a) Reflects the Company’s historical US GAAP consolidated financial statements, as reported, before pro forma adjustments related to the Restaurants Transaction. For the nine month period ended January 27, 2017, revenue and expenses attributable to the Restaurants Business, net of their tax impact, were reported as discontinued operations in the consolidated statement of net income in the Company’s Form 10-Q. For each of the years ended April 29, 2016, April 24, 2015 and April 25, 2014, Bob Evans Restaurants were included in the consolidated results of operations in the Company’s respective Form 10-K’s filed for each of those years.

(b) Reflects the elimination of revenues and expenses representing the historical operating results of the Restaurants Business. These amounts, net of their tax impact, were reported as discontinued operations in the Company’s Form 10-Q for the third quarter ended January 27, 2017, and they will be reported as such in the Company’s audited, consolidated financial statements to be included in the Company’s fiscal 2017 Form 10-K. Additional pro forma adjustments to net sales, cost of sales and interest expense are described in detail in disclosures below.

(c) In addition to the adjustment of revenues and cost of sales from the Restaurants Business, this pro forma adjustment reflects intersegment net sales and cost of sales of food products sold to Bob Evans Restaurants which were eliminated in historical consolidated financial statements. Pursuant to a multi-year supply agreement between the Company and the Buyer, the Company will continue to supply Bob Evans Restaurants with certain of its products for an initial term of five years, which may be extended. The supply agreement requires Bob Evans Restaurants to purchase 100% of certain food products from the Company in the first year of the term. The required percentage of purchases for those products then decreases annually, down to 25% in the final year of the supply agreement’s initial five-year term. The supply agreement provides that the pricing on these sales during the initial term shall equal the actual cost of the products plus a mark-up of six percent, which has been reflected in the pro forma adjusted consolidated statements of net income.

Intersegment net sales of food products sold to Bob Evans Restaurants were $16.8 million, $18.8 million, $19.3 million and $14.8 million for the nine month period ended January 27, 2017, and the years ended April 29, 2016, April 24, 2015, and April 25, 2014, respectively. Intersegment cost of sales of food products sold to Bob Evans Restaurants were $15.8 million, $17.6 million, $18.1 million and $13.9 million for the nine month period ended January 27, 2017 and the years ended April 29, 2016, April 24, 2015, and April 25, 2014, respectively.

(d) In accordance with the terms of the Company’s Revolving Credit Facility (the “Credit Agreement”), we are required to use proceeds from the Restaurants Transaction to repay all outstanding borrowings on our Credit Agreement and did so on the date the Restaurants Transaction closed. Accordingly, the pro forma consolidated statements of net income reflect the elimination of historical interest expense and related amortization of debt issuance costs attributable to the Credit Agreement. The fiscal 2016 pro forma adjustment to interest expense also includes $0.4 million of interest expense associated with the Mortgage Loan on our corporate headquarters, which was required to be settled as part of the Restaurants Transaction. See note (i) for additional information.

(e) The pro forma adjustment for income tax expense (or benefit) was calculated as the difference between the income tax expense (or benefit) as reported, and pro forma income tax expense (or benefit) as calculated by using the statutory rate for the Company excluding our Restaurants Business and adjusting for the impact of permanent items, including the domestic production activities deduction.

 

7


(f) Reflects estimated net cash proceeds from the Restaurants Transaction of $526.8 million, representing the gross sale price of $565.0 million less certain purchase price adjustments and estimated transaction costs. The pro forma adjustment to cash was also impacted by the pro forma elimination of borrowings as discussed in note (i).

(g) Represents adjustments for the estimated taxes payable on the gain associated with the Restaurants Transaction. Taxes on the gain were calculated using a statutory rate of 38%, and the pro forma adjustments also reflect the estimated realization of deferred tax assets associated with the Restaurants Business.

(h) Represents the net assets sold and liabilities conveyed to the Buyer in the Restaurants Transaction.

(i) Represents the elimination of $300.4 million of borrowings on the Credit Agreement and $26.8 million of outstanding borrowings from the Mortgage Loan on our corporate headquarters. In accordance with the terms of the Credit Agreement, we used proceeds from the Restaurants Transaction to repay all outstanding borrowings on our Credit Agreement on the date the Restaurants Transaction closed. The Mortgage Loan borrowings were paid in the fourth quarter of fiscal year 2017 prior to the sale of the Restaurants Business, as required by the Restaurants Transaction. The pro forma adjustment also includes a $2.2 million write off of unamortized debt issuance costs related to these borrowings.

(j) Represents the estimated after-tax gain on the sale of the Restaurants Business of $103.5 million, which was calculated as follows:

 

(in thousands)       

Estimated proceeds, net of transaction costs

   $ 526,810  

Assets of the Restaurants Business (1)

     (498,805

Liabilities of the Restaurants Business

     138,921  
  

 

 

 

Pre-tax gain on sale of the Restaurants Business

     166,926  

Taxes on sale of the Restaurants Business at the combined federal and state statutory tax rate of 38%

     63,432  
  

 

 

 

After-tax gain on sale of the Restaurants Business

   $ 103,494  
  

 

 

 

 

(1)  Includes our corporate headquarters which were sold as part of the Restaurants Transaction as well as $2.2 million of debt issuance costs that were written off as part of the repayment of borrowings on the Credit Agreement.

Transition Services Agreement

Pursuant to a transition services agreement entered into and effective on the closing of the Restaurants Transaction, the Company will supply certain services, primarily information technology related, to Bob Evans Restaurants. The Company will receive certain human resource, tax and accounting services from Bob Evans Restaurants for a period of up to 18 months, which can be further extended. No pro forma adjustments have been made associated with this agreement as services to be provided with a defined monetary value are not considered material and the variable elements are not estimable at this time.

Additional Financial Information

 

     Pro Forma combined earnings before interest, taxes, depreciation and  amortization
(“EBITDA”)
 
(in thousands)    Fiscal 2017
(Nine Months Ended)
    Fiscal 2016     Fiscal 2015     Fiscal 2014  

Net Income (Loss) from Continuing Operations

   $ 15,248     $ 25,727     $ (1,166   $ (4,181

Net Interest Expense

     (1,319     (2,475     (2,352     (2,625

Provision (Benefit) for Income Taxes

     7,700       10,947       (682     (2,595

Depreciation and Amortization

     17,191       21,045       18,364       15,790  

Impairment

     15,256       —         2,761       3,337  
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

   $ 54,076 (1)    $ 55,244 (2)    $ 16,925 (3)    $ 9,726 (4) 
  

 

 

   

 

 

   

 

 

   

 

 

 

 

8


(1) Pro Forma EBITDA for the nine months ended January 27, 2017 includes $3.3 million of severance charges and transaction costs associated with the Restaurants Transaction and acquisition of Pineland Farms Potato Company.
(2)  Pro Forma EBITDA in fiscal 2016 includes $4.8 million of charges primarily associated with the sale leaseback of two production facilities.
(3)  Pro Forma EBITDA in fiscal 2015 includes $21.1 million of charges including legal and professional fees related to shareholder activism, impairment charges, severance including charges associated with the separation of our former CEO and other plant and corporate restructuring costs.
(4) Pro Forma EBITDA in fiscal 2014 includes $8.9 million of charges associated with the closure of production facilities, including impairment, and other corporate restructuring costs.

Non-GAAP Financial Measures

Our non-GAAP measures are used by analysts, investors and other interested parties to compare our performance with the performance of other companies that report similar non-GAAP measures. We believe these non-GAAP measures provide meaningful supplemental information regarding financial performance by excluding certain expenses and benefits that may not be indicative of core business operating results. We believe the non-GAAP measures, when viewed in conjunction with U.S. GAAP results and the accompanying reconciliations, enhance the comparability of results against prior periods and allow for greater transparency of financial results and business outlook. In addition, we use non-GAAP data internally to assess performance and facilitate management’s internal comparison of our financial performance to that of prior periods, as well as trend analysis for budgeting and planning purposes. The presentation of our non-GAAP measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP. Furthermore, our non-GAAP measures may not be comparable to similarly titled measures reported by other companies and may have limitations as an analytical tool.