Bob Evans Farms, Inc. (BOBE)
F1Q09 Earnings Call
August 13, 2008 10:00 am ET
David D. Poplar – Vice President of Investor Relations
Steve Davis - Chairman of the Board and Chief Executive Officer
Donald J. Radkoski - Chief Financial Officer, Treasurer, Assistant Secretary
Jimmy Ewe [ph] – Arstuff [ph]
Brad Levington [ph] - Keybanc Capital Markets
Howard Penney – Research Edge
Amy Greene - Avondale Partners LLC
Greg Ruedy of Stephens Inc
Stephen Anderson - Mkm Partners Llc
Michael Wolman [ph] - Sedody & Company
Previous Statements by BOBE
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This is Dave Poplar and I am here with Steve Davis, Chairman of the Board and Chief Executive Officer, as well as Don Radkoski our Chief Financial Officer. We will start with some prepared remarks and then we’ll open up the call for questions.
Let me first remind you that our comments today contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These forward-looking statements include projections regarding anticipated future results. A number or risks and uncertainties could cause actual results to differ materially from these forward-looking statements.
Please refer to our recent filings with the Securities and Exchange Commission for a discussion of these risk factors. We caution investors not to place undue reliance on these forward-looking statements which speak only as of the date of this presentation. We undertake no obligation to update our forward-looking statements to reflect future events or circumstances.
. I am going to start with a few highlights and then Don will provide us with the financial details for the quarter. After that I will have an update on the progress with our best brand builders and then we’ll be happy to take your questions.
Reported diluted earnings per share for the first quarter of fiscal 2009 were $0.45 compared to $0.38 in the first quarter of fiscal 2008. This represents an 18.4% increase despite a $1.7 million unfavorable variance that negatively impacts our comparison with last year. Don will provide more detail on this variance in his commentary.
Reported operating income was $23.5 million in the first quarter of fiscal 2009, a 9.3% increase compared to $21.5 million in the first quarter of fiscal 2008. In our restaurant segment Bob Evans has now delivered positive same store sales for eight consecutive quarters with same store sales up 2% in the quarter.
Our expanded pipeline of new products and more effective marketing has helped Bob Evans restaurants compete effectively in challenging macro economic conditions. At Mimi’s café our new management team is focusing on improving sales and profits at our core restaurants. Same store sales were down 6.5% for the quarter as economic conditions have adversely impacted consumer spending, particularly hard and most notably in California, Florida, Arizona, and Nevada, where the majority of Mimi’s comp store base resides.
We had another great quarter in our food products segment with a 12% overall sales increase and a 74.5% increase in operating income. We now have achieved 26 consecutive quarters of positive comparable pounds sold. Don will explain these issues in more detail now as he reviews the quarter’s financial highlights.
I am going to spend a few minutes walking through the income statement. Please note that we have provided you with a pre-tax impact of key items that affect year-over-year comparisons to help you understand our operating performance relative to the prior year.
Starting from the top line on the consolidated statement, net sales for the quarter were $440.3 million up 3.7% compared to $424.6 million in the first quarter of fiscal 2008. The increase reflects improved same store sales at Bob Evans restaurants, new restaurant openings at Mimi’s Cafés and strong sales in the products food segment. Cost of sales was $130.4 million or 29.6% of net sales in the first quarter of 2009, compared to $125.6 million or 29.6% of net sales in the first quarter of 2008.
A favorable mix shift in our restaurants segments along with efficiency’s from company wide purchasing initiatives and lower hog costs in the food products segment enabled us to hold cost of sales flat as a percentage of sales despite rising commodity costs; however we do expect cost of sales to increase as a percentage of sales in both segments for the full year.
Operating wages were $152.7 million or 34.7% of net sales in the first quarter of 2009 compared to $153.8 million, or 36.2% of net sales in the first quarter of 2008. This improvement is the results of effective restaurant segment labor management as well as leverage from improved same-store sales at Bob Evans restaurants and lower health care expenses. These benefits more than offset the negative leverage from same store sales declines at Mimi’s.
SG&A expenses for the quarter were $40.2 million or 9.1% of net sales compared to $35.8 million or 8.4% of net sales in the first quarter of fiscal 2008. The entire impact of the $1.7 million unfavorable variance that Steve mentioned earlier is in this line as we incurred a $675,000 expense related to a legal settlement this quarter. Also having a negative impact on SG&A comparison is the pre-tax net gain of nearly $1.1 million from the sale of real estate assets that were recorded in last years first quarter. We did not sell any real estate assets in the first quarter of this year and, as we have stated, we don’t expect material gains on asset sales this year given the current softness of the real estate market.