Columbus, Ohio-based Bob Evans Farms yesterday [Tuesday] announced financial results for the fiscal third quarter and nine months ended 25 January 2002.
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Diluted earnings per share for the quarter were US$0.46, up 39% from a year ago and above the guidance provided in the company’s preliminary announcement on 8 January. During January, same-store sales in the company’s restaurant business remained stronger than expected, while profit margins in both the restaurant and food products segments were significantly above the year-earlier levels.
For the Q3, total net sales were US$262.8m, up 6% from US$249m in the corresponding period last year. Reported sales comparisons were affected by the divestiture of the Hickory Specialties, Inc. smoke flavorings business last fall. Net income for the quarter was US$16.3m, or US$0.46 per share on a diluted basis, compared with US$11.5m, or US$0.33 per share a year ago.
For the first nine months of fiscal 2002, net sales totaled US$801.3m, a 5% increase from US$759.8m a year ago. Excluding the impact of two non-recurring items during this year’s Q2, net income for the nine-month period was US$47.8m, or US$1.35 per share, up 23% from US$38.9m, or US$1.10 per share, a year ago. Reported net income for the nine months this year was US$50.1m, or US$1.42 per share.
In the restaurant segment, same-store sales increased 5.2% for the quarter, partly as a result of unusually mild winter weather across most of the company’s regional markets. Menu prices were up 2.9%, on average, from a year ago. The segment’s total sales rose 9%, and operating income advanced 38%. The operating margin widened to 8.4% from 6.7%, which mainly reflects a reduction in labor-related costs to 39.5% of sales from 41.3% a year earlier.
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By GlobalDataStewart K. Owens, chairman of the board and CEO commented: “Our restaurants are benefiting from a powerful combination of strong sales and lower expenses.
“Favorable weather has clearly contributed to our sales growth. However, we also believe our positioning within the restaurant industry — including a broad menu, attractive price points and a comfortable, family-oriented atmosphere — coupled with our continued emphasis on friendly customer service, may be particularly appealing to many consumers in the current environment. On the expense side, we continue to reap the benefits of our initiatives earlier this year to bring labor costs down without negatively affecting customer service levels.”
The company has opened 13 new Bob Evans Restaurants through the first nine months of fiscal 2002 and expects to open 27 for the full year, bringing the total to 495 at year-end. For fiscal 2003, current plans call for approximately 30 to 32 new restaurants.
Profitability in the food products segment also improved significantly during the quarter, which reflects lower raw material costs. Hog costs averaged US$32.00 per hundredweight for the quarter, well below the US$36 average a year earlier. Pounds sold from comparable products (principally sausage) were equal to a year ago – an improvement from trends earlier in this fiscal year. The segment’s total sales were down 6% (2% percent after adjusting for sales of Hickory Specialties, which was sold in the Q2 of this year), but operating income rose 19%. The operating margin increased to 14% from 11% a year ago.
Owens said, “Lower-than-expected hog costs have bolstered our margins in the sausage business, and we believe they will remain favorable for at least the next few months. In addition, we are pleased with the improved volume trends we saw during the quarter — particularly in January.
“For the balance of the fiscal year, barring severe weather conditions or a sudden increase in hog costs, diluted earnings per share are likely to remain above our previous projections, reaching approximately US$0.45 for the Q4 and US$1.80, excluding the impact of non-recurring items, for fiscal 2002. That would represent a 25% increase for the FY.
“Given the wide range of possible scenarios, including more normal winter weather and less favorable hog cost comparisons next year, we are initially targeting a broad range for earnings per share in fiscal 2003 – between US$1.85 and US$2.”
Owens concluded: “Our proven long-term strategies continue to serve us well. Through controlled growth, high-quality product offerings and excellent customer service on both sides of the business, we are continuing to build the value of the premium Bob Evans brand for the benefit of all our stakeholders.”
As of 25 January the company’s balance sheet remained strong, with stockholders’ equity of US$499.1m, compared with US$73.7m in total debt obligations.
On 5 February, the Bob Evans Farms board of directors declared a quarterly cash dividend of 10 cents (US$0.1) per share on the company’s outstanding common stock. The dividend is payable 1 March 2002, to stockholders of record at the close of business on 15 February 2002.
