Earnings per share for the quarter were $0.34, up 10 percent from $0.31 a year ago and within the range of expectations communicated by the company earlier this year. Operating income was slightly higher in both segments. However, increased costs in the restaurant segment put pressure on margins, and in the food products segment, a decline in comparable pounds sold for the quarter and higher hog costs at the end of the quarter impacted operating income. Earnings per share benefited from a reduced tax rate and the company’s ongoing share repurchase program. Net sales for the quarter totaled $251.5 million, up 5 percent from $239.0 million a year ago. For the full fiscal year, net sales rose 6 percent and surpassed $1 billion for the first time in the company’s history, while diluted earnings per share were $1.44, up 4 percent from $1.38 in fiscal 2000.
“We are pleased to report record highs for sales and earnings per share in fiscal 2001, but recognize that we face significant challenges to our profitability on both sides of the business,” said Stewart K. Owens, chairman of the board and chief executive officer.
With a 2.5 percent increase in the fourth quarter, Bob Evans Restaurants completed its fourth consecutive year of same-store sales growth, which was 2.6 percent for the full year. Average menu prices were up 2.8 percent for the quarter. The segment’s total net sales rose 8 percent for the quarter, while operating income increased 4 percent. Profit margins were pressured by higher labor, food and utility costs during the quarter.
Bob Evans Restaurants met its expansion target for the year by opening 15 new restaurants in the fourth quarter and 30 for the full fiscal year. At year-end, the company had 469 restaurants in operation, and plans call for approximately 30 openings in fiscal 2002. Also during fiscal 2001, Bob Evans’ “Carry Home Kitchen” format was rolled out into virtually all restaurants, which resulted in continued strong growth in carryout sales. “Corner Cupboards,” featuring retail merchandise, were also added to 60 restaurants, including the 30 new builds during fiscal 2001 with a total of 143 in operation at the end of the fiscal year.
Owens commented, “While we continue to make strategic progress with our restaurant expansion, remodeling and marketing programs, our sales growth has decelerated modestly in recent months, in line with industry trends. Given the general U.S. economic conditions and higher gasoline prices, we are cautious about this year’s same-store sales growth. May 2001 same-store sales were up 1.8 percent, with a menu price increase of 2.9 percent. Meanwhile, the restaurant segment’s profitability has been affected by increases in a wide range of expense items, including labor, food and utilities. While some of these are outside of our control, we undertook an intensive review of our labor cost structure during the fourth quarter. We believe we have identified a number of procedural and administrative changes that we can make over the next few months to trim labor costs without sacrificing our ongoing commitment to excellent customer service.”
Results in the food products segment were affected by a sharp rise in hog costs during the final month of the quarter, which reflects pressure on global meat prices as a result of the industry’s well-publicized problems in Europe. Hog costs averaged $40 per hundredweight for the quarter, compared with $44 a year earlier, but were significantly higher in April, and well above the $36 average of the third fiscal quarter. In addition, pounds sold from comparable products (principally sausage) were off 5 percent from a year ago. The segment’s total sales for the quarter were down 4 percent, though operating income edged up 1 percent.
“We plan to increase our marketing and promotional activity in the food products segment during fiscal 2002,” Owens said. “In addition, we will continue to introduce new products and line extensions, like our garlic mashed potatoes in fiscal 2001 and our current introduction of Wildfire Barbecue Sauce, which fit with our homestyle image and both leverage and reinforce the premium reputation of Bob Evans Restaurants.”
Owens concluded, “Overall, we are cautiously optimistic regarding the earnings outlook for fiscal 2002. However, we believe our previous guidance may be somewhat aggressive and are more comfortable with estimates in the range of $1.55 per share, given the hog cost environment and continuing pressures on operating margins in our restaurants.”
During the fourth quarter, the company repurchased approximately 60,000 shares of Bob Evans Farms common stock, increasing the total for the year to 816,000 shares. On May 7, 2001, the board of directors authorized the repurchase of up to an additional 2 million shares during fiscal 2002. At the end of fiscal 2001, there were approximately 34.8 million shares outstanding. Also on May 7, the board declared a quarterly cash dividend of nine cents ($0.09) per share on the company’s outstanding common stock. The dividend was payable June 1, 2001, to stockholders of record at the close of business on May 18, 2001.
Bob Evans Farms, Inc. currently owns and operates 469 full-service, family restaurants principally in the East North Central, mid-Atlantic and Southern United States. The company is also a leading producer of pork sausage under the Bob Evans and Owens Country Sausage brand names.
Consolidated Financial Results
(Thousands, except per share data)
Three Months Ended Year Ended
Apr. 27, Apr. 28, Apr. 27, Apr. 28,
2001 2000 2001 2000
Restaurant Segment $200,572 $186,198 $805,957 $750,851
Food Products Segment 50,891 52,775 217,857 213,772
Total $251,463 $238,973 $1,023,814 $964,623
Restaurant Segment $16,004 $15,385 $68,663 $67,877
Food Products Segment 3,444 3,403 14,803 17,610
Total $19,448 $18,788 $83,466 $85,487
Income Taxes $18,374 $17,547 $78,714 $83,954
Net Income $11,852 $11,065 $50,771 $52,893
Earnings Per Share
Basic $0.34 $0.31 $1.45 $1.38
Diluted $0.34 $0.31 $1.44 $1.38
Average Shares Outstanding
Basic 34,814 36,175 35,005 38,230
Diluted 35,165 36,243 35,284 38,366
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The statements contained in this news release which are not historical fact are “forward-looking statements” that involve various important assumptions, risks, uncertainties and other factors which could cause the company’s actual results for fiscal 2002 and beyond to differ materially from those expressed in such forward-looking statements. These important factors include, without limitation, changes in hog costs and the possibility of severe weather conditions where the company operates its restaurants, as well as other risks previously disclosed in the company’s securities filings and press releases.