Bob Evans net income up, sales down for FY2010

by Bryan Salvage
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COLUMBUS, OHIO – Bob Evans Farms Inc. announced net income of $20.8 million in the fourth quarter of fiscal 2010. Net sales were $442.7 million, a 2.7% increase compared to $431 million in same period in 2009.

Net income was $70,328,000 for fiscal 2010 compared to a loss of $5,146,000 for the year earlier period. Net sales were $1.73 billion in fiscal 2010, a 1.4% decrease compared to $1.75 billion in fiscal 2009. This decrease was the result of same-store sales declines at Bob Evans Restaurants and Mimi's Cafe, partly offset by the impact of the 53rd operating week.

An ongoing focus on innovation and productivity initiatives in fiscal 2010 enabled the company to deliver a solid year, despite top-line challenges, said Steve Davis, chairman and chief executive officer. "Excluding special items, our fiscal 2010 operating income results were within our guided range," Mr. Davis added. "Productivity initiatives — particularly in cost of sales, labor and SG&A [selling, general and administrative expense] — helped offset negative leverage from lower sales and record-high sow costs in our fourth quarter.

“The food products segment's profitability for the year exceeded our expectations, due largely to a strong first half and lower full-year sow costs relative to fiscal 2009,” he continued. “Our diluted earnings per share of $2.28 benefited from a lower effective tax rate driven by settlements with taxing authorities and reduced interest expense due to an $80 million debt reduction in fiscal 2010.

"During the last five years, we returned to our shareholders $95 million in dividends and $250 million in share repurchases while reducing total debt by $67 million,” Mr. Davis said. “We have also increased our adjusted operating income for five consecutive years."

Mr. Davis said the company's fourth-quarter results reflect difficult operating conditions in the restaurant segment and higher sow costs in the food-products segment. "Our food-products segment faced record-high sow costs in the quarter, which caused the segment's profitability to fall below our expectations, but we have completed the transition to a warehouse distribution model, which has a lower cost structure."

The food products segment's net sales were $315.7 million in fiscal 2010, up 1.4% compared to $311.4 million in fiscal 2009. Pounds sold of comparable products increased 7% in fiscal 2010 compared to fiscal 2009, driven by new account gains and new authorizations in existing accounts of sausage products and side dishes. Higher levels of promotional discounts provided to retailers reduced the amount of the net sales increase relative to the increase in comparable pounds sold.
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