Bob Evans Farms, Inc. (BOBE)
March 12, 2013 11:50 am ET
Scott C. Taggart - Vice President, Investor Relations
Steven A. Davis - Chairman and Chief Executive Officer
Paul F. DeSantis - Chief Financial Officer, Principal Accounting officer, Treasurer and Assistant Corporate Secretary
Previous Statements by BOBE
» Bob Evans Farms Management Discusses Q3 2013 Results - Earnings Call Transcript
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I'm going to turn it over to Scott Taggart, who runs Investor Relations for Bob Evans. And he, in turn, will introduce Steven Davis, CEO. Scott, thank you.
Scott C. Taggart
Before I begin, I'd like to refer you to our Safe Harbor statement on Slide 2. By the way, the deck is available on the bobevans.com website as well. Certain information that we may discuss today regarding future performance is forward-looking. Various factors could affect the company's future results and cause those results to differ materially from those expressed in our forward-looking statements. Please refer to our recent filings with the Securities and Exchange Commission for a further discussion of these risks factors.
With that, I'd like to introduce Steve Davis, our Chairman and Chief Executive Officer.
Steven A. Davis
Thank you, Scott. [indiscernible] ready today? Good, good to see you. Thanks for having us. Mr. Buckley, it's always a pleasure. This is a investor fact sheet that -- we've gone paperless, so this is available on our website, correct? We wanted you to make sure that this is available. It's a facts and figures sheet of our company.
I want to start with the vision of Bob Evans. People are asking what is Bob Evans Farms? So it's regional brands, trying to drive them and make them powerful national brands. And as you can see, we've got Bob Evans Restaurants and Bob Evans Food Products. And let's talk about what is our long-term earnings per share growth? Our goal is to drive the company 8% to 12% on a compounded basis. And we basically have 3 pillars that drive that. First is to transform our core business to enable expansion. So a lot of our transformation that we've done over the last 5 years is all about getting the company ready and consistent for growth. The second is to selectively invest in high return on invested capital projects and opportunities, both internal and external. An example of this was our recent acquisition of our Kettle Creations business, which for years had been a co-packer, as part of our Growing Food Products business and we had a great business partnership with them and when we look at the combination of the 2 things could do, we decided to enter into an acquisition agreement.
We like to pride ourselves on being very disciplined with the funds that are generated by our business and it's all about driving stakeholder value with disciplined capital allocation. What's the proof of a 8% to 12%? We always say the past is not always a predictor of the future, but it's a good place to start. If you look at -- since fiscal year 2007, we've grown on a compounded basis of about 9%.
You probably heard about the divestiture of the Mimi’s Café business and one of the questions I was asked when I first joined the company in 2006, and it was a good question, is like, how do you get back to the historical margins that Bob Evans used to have prior to the acquisition? So if you look at the margin composition for Bob Evans, as an enterprise, without Mimi’s Café, it was about 9.5%. Now obviously, a lot of things have happened since 2004, commodities have gone up, minimum wage have gone up, other input costs have gone up. I want to show you this chart. This was the last financial disclosure we did at the end of our third quarter and it shows the margin contribution year-to-date for Bob Evans Restaurants, Bob Evans Food Products and Mimi’s Café. So you see the impact on the margins, basically arithmetic.
This is now our fourth quarter guidance for the end of this fiscal year. And you can see that Bob Evans Restaurants and Bob Evans Foods gets us back to the margins that we had prior to the acquisition. So you can see how all of a sudden, through the divestiture, we have completely changed the margin profile. And think about it, now, you'll have upside with the consolidation of the Bob Evans Foods and Bob Evans Restaurants, and I'll take you through some of those initiatives that we believe are going to drive the margins and the sales.
But if you look at some of the recent programs that we've talked about, our Farm-Fresh Refresh, we talked about the Mimi's divestiture and then the Kettle Creations' acquisition. The Kettle Creations' acquisition is important because we are now 90% vertically integrated within our food products business, which obviously will have favorable margin implications. We like to talk about a balanced approach and it always starts out with investing in the business. And the majority of our investments that you'll see this year or next year is in our Bob Evans Farm-Fresh Refresh remodel program that has had great success in terms of reenergizing the brand, driving sales and improving return on invested capital. Our dividend yield is among some of the top tier in the restaurant industry. And just in fiscal year '12, we returned nearly $100 million to shareholders in the form of dividends and share repurchases. And we've got a very strong balance sheet and we used that wisely. We don't borrow money just because money is cheap, we borrow money for strategic reasons. But as you can see, we're less than 2x our EBITDA with our debt obligations.