Bob Evans Farms (BOBE)
Q1 2014 Earnings Call
August 20, 2013 10:00 am ET
Scott C. Taggart - Vice President of Investor Relations
Paul F. DeSantis - Chief Financial Officer, Principal Accounting Officer, Treasurer and Assistant Secretary
Steven A. Davis - Chairman and Chief Executive Officer
Brian J. Bittner - Oppenheimer & Co. Inc., Research Division
Will Slabaugh - Stephens Inc., Research Division
Michael W. Gallo - CL King & Associates, Inc., Research Division
Michael Halen - Sidoti & Company, LLC
Stephen Anderson - Miller Tabak + Co., LLC, Research Division
David Carlson - KeyBanc Capital Markets Inc., Research Division
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Scott C. Taggart
Thank you, and good morning from Columbus, Ohio. This is Scott Taggart, Vice President of Investor Relations. I would like to welcome you to Bob Evans Farms' First Quarter Fiscal 2014 Conference Call. With me this morning are Steve Davis, our Chairman and Chief Executive Officer; Paul DeSantis, our Chief Financial Officer; and Ed Mitchell, our Vice President and Corporate Controller.
Our call today begins with a summary of our performance from Paul; and then Steve will go into further detail regarding developments within each of our segments. After that, we will open the call for questions.
Please note 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 of risks and uncertainties could cause our actual results to differ materially from these forward-looking statements.
Our recent filings with the Securities and Exchange Commission include a discussion of these risk factors. We caution investors not to place undue reliance on forward-looking statements, which speak only as of the date of this conference call, and we undertake no obligation to update these statements.
Also, we will reference non-GAAP financial measures. We have provided a reconciliation of the non-GAAP information to the most directly comparable GAAP financial measures in our earnings release, posted on the Investor Relations section of our corporate website at bobevans.com and filed with the Securities and Exchange Commission on Form 8-K.
And now here's Paul DeSantis with a review of the quarter's results and a look ahead of the remainder of fiscal 2014. Paul?
Paul F. DeSantis
Thanks, Scott. Good morning, everyone. We reported non-GAAP EPS for the first quarter of $0.58 a share. We're also reaffirming our full year EPS guidance of $2.60 to $2.67 per share prior to any effect of the share repurchase program we announced yesterday.
Today, I want to highlight some challenges we're facing in the second quarter and discuss our confidence in the strategic actions that will drive profitable growth in the third and fourth quarter.
As we continue to remodel Bob Evans Restaurants, we're getting better insight into the effects on the P&L and the timing of those effects. One of the items to bring to your attention is the effect of the calendarization of the remodel program for this fiscal year. As you know, we accelerated 2 years of remodel into this year. During the first and second fiscal quarters, we're planning on more remodels this year than last year. However, that tide begins to turn during the third quarter. And by the fourth quarter, we'll have significantly less remodels than last year. As a result, we expect to see the remodel sales-related lift begin to accelerate in the third quarter, through the fourth quarter when we'll roll over more closed days last year than this year.
Additionally, on an incremental basis, the refresh program cost us approximately $1.1 million in the quarter, primarily through the profit effect of closed restaurant days and preopening expenses, as well as SG&A expense to support the expanded startup program.
During the first quarter, Bob Evans Restaurants began the implementation of a new workforce management process that includes a new labor scheduling tool. We're making this transformational investment to help our people manage our largest cost item on the P&L. Although cost were less than $100,000 in the first quarter, we expect to invest approximately $900,000 to $1.2 million during the second quarter, primarily to train almost 2,000 managers.
Workforce management will allow us to better schedule our teams to ensure that the right people are in place at the right time for peak labor efficiency. We have 56 restaurants already converted and expect the chain to be done by the end of the second quarter of fiscal 2014. The full year effect of this program, once it's up and running, is expected to be $6 million to $7 million or 60 to 70 basis points of margin improvement for the restaurant business.
We will not see that full amount on the bottom line as we also anticipate continuing labor cost increases over time in areas like minimum wages and health care.
Net sales were once again up double digits for the foods business, but profitability was challenged. There were 3 contributors to the profit decline year-over-year: increased sow cost, the timing of trade spending and incremental SG&A cost, primarily associated with allocation increases from the Mimi's business and direct and indirect cost associated with supporting the ERP project.