NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1.
Summary of Significant Accounting Policies
Unaudited Consolidated Financial Statements
: The accompanying unaudited consolidated financial statements of Bob Evans Farms, Inc. (“Bob Evans”) and its subsidiaries (collectively, Bob Evans and its subsidiaries are referred to as “the Company,” “we,” “us” and “our”) are presented in accordance with the requirements of Form 10-Q and, consequently, do not include all of the disclosures normally required by U.S. generally accepted accounting principles or those normally made in our Form 10-K filing. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of our financial position and results of operations have been included. The consolidated financial statements are not necessarily indicative of the results of operations for a full fiscal year. The information in this Form 10-Q should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Form 10-K for the fiscal year ended
April 29,
2016
. Throughout the Unaudited Consolidated Financial Statements and Notes to the Consolidated Financial Statements, dollars are in thousands, except share and per-share amounts.
Description of Business
: We produce and distribute a variety of complementary home-style, refrigerated side dish convenience food items and pork sausage under the Bob Evans ®, Owens ® and Country Creek ® brand names. These food products are available throughout the United States at grocery retailers. We also manufacture and sell similar products to food-service accounts, including Bob Evans Restaurants and other restaurants. The revenue from sales to Bob Evans Restaurants are eliminated in consolidation.
On
January 24, 2017
, we entered into a definitive agreement for the sale of Bob Evans Restaurants to Golden Gate Capital Opportunity Fund, L.P. All assets being sold and liabilities being conveyed are presented as "Held for Sale" on the Consolidated Balance Sheets. Additionally, for all periods presented in our Consolidated Statements of Net Income, all sales, costs, expenses and income taxes attributable to Bob Evans Restaurants have been aggregated under the captions "Income from Discontinued Operations, Net of Income Taxes." Cash flows used in or provided by Bob Evans Restaurants have been aggregated in the Consolidated Statement of Cash Flows as part of discontinued operations. See Note 2 - Discontinued Operations and Assets Held for Sale for additional information.
Prior to the decision to sell our restaurant business, we had
two
reporting segments, Bob Evans Restaurants and BEF Foods. BEF Foods sells food products throughout the retail grocery and food service channels, including to Bob Evans Restaurants. Corporate and other costs related to shared services functions were not allocated to our reporting segments. As a result of the decision to sell our Restaurants business, which is now classified as discontinued operations, we now have
one
reporting segment. Revenues and costs related to our BEF Foods business, including indirect corporate overhead costs, are reported within results from continuing operations. All revenues and costs incurred directly in support of the Bob Evans Restaurants business are presented in results from discontinued operations. Prior year information has been recast to conform with the current presentation. Unless otherwise stated, the information disclosed in footnotes accompanying the financial statements refer to continuing operations. See Note 2 for additional information regarding the planned sale of the Bob Evans Restaurants business.
Revenue Recognition:
Revenue is recognized when products are received by our customers. We engage in promotional (sales incentive / trade spend) programs in the form of "off-invoice" deductions, billbacks, cooperative advertising and coupons with our customers. Costs associated with these programs are classified as a reduction of gross sales in the period in which the sale occurs. Promotional spending for continuing operations, primarily comprised of off-invoice deductions and billbacks, was
$27,617
and
$26,658
for the three months ended
January 27, 2017
, and
January 22, 2016
, respectively, and
$63,238
and
$57,066
for the
nine months ended
January 27, 2017
, and
January 22, 2016
, respectively.
Shipping and Handling costs:
Expenditures related to shipping products to our customers are expensed when incurred. Shipping and handling costs for continuing operations were
$4,423
and
$3,680
for the three months ended
January 27, 2017
, and
January 22, 2016
, respectively, and
$11,828
and
$10,871
for the
nine months ended
January 27, 2017
, and
January 22, 2016
, respectively, and are recorded in the other operating expenses line of the Consolidated Statements of Net Income.
Accounts Receivable:
Accounts receivable represents amounts owed to us through our operating activities and are presented net of allowance for doubtful accounts. Accounts receivable consists primarily of trade receivables from customer sales. We evaluate the collectability of our accounts receivable based on a combination of factors. In circumstances where we are aware of a specific customer’s inability to meet its financial obligations to us, we record a specific allowance for bad debts against amounts due to reduce the net recognized receivable to the amount we reasonably believe will be collected. In addition, we recognize allowances for bad debts based on the length of time receivables are past due with allowance percentages, based
on our historical experiences, applied on a graduated scale relative to the age of the receivable amounts. If circumstances such as higher than expected bad debt experience or an unexpected material adverse change in a major customer’s ability to meet its financial obligations to us were to occur, the recoverability of amounts due to us could change by a material amount. We had allowance for doubtful accounts of
$259
and
$421
as of
January 27, 2017
, and
April 29, 2016
, respectively. Accounts receivable was reduced by
$9,549
and
$4,916
as of
January 27, 2017
, and
April 29, 2016
, respectively, related to promotional incentives that reduce what is owed to the Company from certain customers.
Notes Receivable:
As a result of the sale of Mimi’s Café to Le Duff America, Inc., we received a Promissory Note ("the Note") for
$30,000
. The Note had an annual interest rate of
1.5%
, a term of
seven years
and a principal and interest payment due in February 2020. Partial prepayments were required prior to maturity if the buyer's business reached certain levels of EBITDA during specified periods. No partial prepayments were received on the Note. The note was originally valued using a discounted cash flow model. The Company recognized accretion income on the Note of $
1,133
and $
1,539
for the
nine months ended
January 27, 2017
, and
January 22, 2016
, respectively. Accretion income is reflected within the Net Interest Expense caption of the
Consolidated Statements of Net Income
.
Subsequent to the end of our second quarter in fiscal 2017, management determined that full collectability under the terms of the Note was no longer probable. As a result, the Company re-evaluated the cash flows expected to be received from the Note. Based on the revised expected cash flows, the Company recorded an impairment reserve of
$16,000
in the second quarter of fiscal 2017 which represented the difference between the previous carrying value and the revised expected cash flows. In the third quarter of fiscal 2017, we reached an agreement with Mimi's Café and settled the Note. We received a payment of
$7,000
which settled all of Mimi's Café outstanding obligations of the Note. At the time of settlement, the carrying value of the Note was
$6,256
. The settlement resulted in a gain of
$744
in the third quarter of fiscal 2017 and was recorded in the Impairments line of the Consolidated Statements of Net Income.
Inventories:
We value our inventories at an average cost method which approximates a FIFO basis due to the perishable nature of that inventory. Inventory includes raw materials and supplies (
$6,849
at
January 27, 2017
, and
$5,911
at
April 29, 2016
) and finished goods (
$12,606
at
January 27, 2017
, and
$11,182
at
April 29, 2016
).
Property, Plant and Equipment:
Property, plant and equipment is recorded at cost less accumulated depreciation. The straight-line depreciation method is used. Depreciation is calculated at rates adequate to amortize costs over the estimated useful lives of buildings and improvements (primarily
5
to
25
years) and machinery and equipment (
3
to
10
years). Improvements to leased properties are depreciated over the shorter of their useful lives or the initial lease terms. Total depreciation expense from continuing operations was
$6,294
and
$4,986
in the three months ended
January 27, 2017
, and
January 22, 2016
, respectively, and
$17,074
and
$15,849
for the
nine months ended
January 27, 2017
, and
January 22, 2016
, respectively.
During the
nine months ended
January 27, 2017
and
January 22, 2016
, we capitalized internal labor costs of
$565
and
$1,106
, respectively, primarily related to the implementation of the second phase of our enterprise resource planning system ("ERP System") and other IT projects. The first phase of our ERP system was put in service on April 25, 2015, and has an expected useful life of
10
years. The second phase of our ERP system was put in service in the second quarter of fiscal year 2017 and also has an expected useful life of
10
years.
We evaluate property, plant and equipment held and used in the business for impairment whenever events or changes in circumstance indicate that the carrying amount of a long-lived asset may not be recoverable. Impairment is determined by comparing the estimated fair value for the asset group to the carrying amount of its assets. If impairment exists, the amount of impairment is measured as the excess of the carrying amount over the estimated fair values of the assets. Assets classified as held for sale are measured at the lower of their carrying value or fair value less costs to sell. See Note 2 for additional information regarding assets classified as held for sale.
Goodwill and Other Intangible Assets:
Goodwill and other intangible assets, which primarily
represent the cost in excess of fair market value of net assets acquired, were
$19,712
and
$19,829
as of
January 27, 2017
, and
April 29, 2016
, respectively. The majority of our goodwill was acquired as part of our fiscal 2013 acquisition of Kettle Creations. Additionally, as part of this acquisition we obtained a non-compete agreement with certain executives of the former company. The Kettle Creations non-compete agreement is amortized on a straight-line basis over its estimated economic life of
five
years.
Goodwill impairment testing involves a comparison of the estimated fair value of reporting units to the respective carrying amount. If the estimated fair value exceeds the carrying amount, then no impairment exists. If the carrying amount exceeds the estimated fair value, then a second step is performed to determine the amount of impairment, if any. We perform our impairment test using a combination of income-based and market-based approaches. The income-based approach indicates the fair value of an asset or business based on the cash flows it can be expected to generate over its remaining useful life.
Under the market-based approach, fair value is determined by comparing our reporting segments to similar businesses or guideline companies whose securities are actively traded in public markets.
Earnings Per Share ("EPS"):
Our basic EPS computation is based on the weighted-average number of shares of common stock outstanding during the period presented. Our diluted EPS calculation reflects the assumed vesting of restricted shares and market-based performance shares, the exercise and conversion of outstanding employee stock options and the settlement of share-based obligations recorded as liabilities on the Consolidated Balance Sheet (see Note 6 for more information), net of the impact of anti-dilutive shares.
The numerator in calculating both basic and diluted EPS for each period is reported net income, income from continuing operations or income from discontinued operations. The denominator is based on the following weighted-average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
(in thousands)
|
January 27, 2017
|
|
January 22, 2016
|
|
January 27, 2017
|
|
January 22, 2016
|
Basic
|
19,847
|
|
|
20,692
|
|
|
19,836
|
|
|
21,845
|
|
Dilutive shares
|
221
|
|
|
111
|
|
|
219
|
|
|
144
|
|
Diluted
|
20,068
|
|
|
20,803
|
|
|
20,055
|
|
|
21,989
|
|
In the
three months and nine months
ended
January 27, 2017
,
249,860
and
270,119
shares of common stock were excluded from the diluted EPS calculations because they were anti-dilutive. In the
three months and nine months
ended
January 22, 2016
,
249,684
and
240,974
shares of common stock were excluded from the diluted EPS calculations because they were anti-dilutive.
Dividends:
In each of the three months ended
January 27, 2017
, and
January 22, 2016
, the Company paid a quarterly dividend equal to
$0.34
per share on our outstanding common stock. In the
nine months ended
January 27, 2017
, and
January 22, 2016
, the Company paid dividends equal to
$1.02
and
$0.96
, respectively, per share on our outstanding common stock. Individuals that hold awards for unvested and outstanding restricted stock units, market-based performance share units and outstanding deferred stock awards are entitled to receive dividend equivalent rights equal to the per-share cash dividends paid on outstanding units. Dividend equivalent rights are forfeitable until the underlying share-units from which they were derived vest. Share-based dividend equivalents are recorded as a reduction to retained earnings, with an offsetting increase to capital in excess of par value. Refer to table below:
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
(in thousands)
|
January 27, 2017
|
|
January 22, 2016
|
Cash dividends paid to common stockholders
|
$
|
20,182
|
|
|
$
|
21,132
|
|
Dividend equivalent rights
|
387
|
|
|
307
|
|
Total dividends
|
$
|
20,569
|
|
|
$
|
21,439
|
|
Accrued Non-Income Taxes:
Accrued non-income taxes primarily represent obligations for real estate and personal property taxes, as well as sales and use taxes. Accrued non-income taxes were
$11,040
and
$14,474
as of
January 27, 2017
, and
April 29, 2016
, respectively.
Self-Insurance Reserves:
We record estimates for certain health, workers’ compensation and general insurance costs that are self-insured programs. Self-insurance reserves include actuarial estimates of both claims filed, carried at their expected ultimate settlement value, and claims incurred but not yet reported. Our liability represents an estimate of the ultimate cost of claims incurred as of the balance sheet date. Self-insurance reserves were
$9,263
and
$11,288
as of
January 27, 2017
, and
April 29, 2016
, respectively.
Deferred gain on sale leaseback transaction:
In fiscal 2016, we entered into sale leaseback transactions for
two
of our production facilities.
The transaction included
20
-year initial lease terms for each facility with additional renewal periods, as well as payment and performance guaranties. A gain of $
2,305
on the sale of our Lima, Ohio, facility was deferred and is being recognized on a straight-line basis over the initial term of the lease.
Advertising Costs:
Media advertising is expensed at the time the media first airs. We expense all other advertising costs as incurred. Advertising expense from continuing operations was $
2,067
and $
1,144
in the three months ended
January 27,
2017
, and
January 22, 2016
, respectively, and $
7,682
and $
5,007
for the
nine months ended
January 27, 2017
, and
January 22, 2016
, respectively. Advertising costs are classified as other operating expenses in the Consolidated Statements of Net Income.
Commitments and Contingencies:
We occasionally use purchase commitment contracts to stabilize the potentially volatile pricing associated with certain commodity items.
We are self-insured for most casualty losses and employee health-care claims up to certain stop-loss limits per claimant. We have accounted for liabilities for casualty losses, including both reported claims and incurred, but not reported claims, based on information provided by independent actuaries. We have estimated our employee health-care claims liability through a review of incurred and paid claims history. We do not believe that our calculation of casualty losses and employee health-care claims liabilities would change materially under different conditions and/or different methods. However, due to the inherent volatility of actuarially determined casualty losses and employee health care claims, it is reasonably possible that we could experience changes in estimated losses, which could be material to net income.
New Accounting Pronouncements:
In the normal course of business, management evaluates all new accounting pronouncements issued by the Financial Accounting Standard Board ("FASB"), the Securities and Exchange Commission (“SEC”), the Emerging Issues Task Force, the American Institute of Certified Public Accountants or any other authoritative accounting body to determine the potential impact they may have on the Company’s consolidated financial statements.
In May 2014, the FASB and the International Accounting Standards Board ("IASB") issued new joint guidance surrounding revenue recognition. Under U.S. generally accepted accounting principles ("US GAAP"), this guidance is being introduced to the ASC as Topic 606, Revenue from Contracts with Customers ("Topic 606"), by Accounting Standards Update No. 2014-09. The new standard supersedes a majority of existing revenue recognition guidance under US GAAP, and requires companies to recognize revenue when it transfers goods or services to a customer in an amount that reflects the consideration to which a company expects to be entitled. Companies may need to use more judgment and make more estimates while recognizing revenue, which could result in additional disclosures to the financial statements. Topic 606 allows for either a "full retrospective" adoption or a "modified retrospective" adoption. The standard will become effective for us in fiscal 2019. We are currently evaluating which method we will use and assessing the impact this guidance will have on our consolidated financial statements with a focus on arrangements with customers.
In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements - Going Concern to provide guidance about management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern. The guidance requires management to assess whether there are conditions or events, considered in the aggregate, that raise substantial doubt about an entity's ability to continue as a going concern within one year after the date that the financial statements are issued. When management identifies such conditions or events, a footnote disclosure is required to disclose their nature, as well as management's plans to alleviate the substantial doubt to continue as a going concern. The standard will become effective for our fiscal year end 2017. We do not expect this update to have an impact on the consolidated financial statements.
In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory. ASU 2015-11 simplifies the subsequent measurement of inventory by replacing today's lower of cost or market test with a lower of cost or net realizable test, which is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The standard will become effective for us in fiscal 2018. We do not expect this update to have a material impact on the consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases. This guidance requires companies to put most leases on their balance sheets but recognize expenses on their income statements in a manner similar to today’s accounting. The new standard also will result in enhanced quantitative and qualitative disclosures, including significant judgments made by management, to provide greater insight into the extent of revenue and expense recognized and expected to be recognized from existing leases. The standard requires modified retrospective adoption and will become effective beginning in fiscal 2020, with early adoption permitted. We are currently evaluating this standard, including the timing of adoption and the related impact on our consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Compensation Accounting. ASU 2016-09 requires that excess tax benefits are recorded on the income statement as opposed to additional paid-in-capital, and treated as an operating activity on the statement of cash flows. ASU 2016-09 also allows companies to make an accounting policy election to either estimate the number of awards that are expected to vest (current U.S. GAAP) or account for forfeitures when they occur. ASU 2016-09 further requires cash paid by an employer when directly withholding shares for tax-withholding purposes to be classified as a financing activity on the statement of cash flows. The standard will become effective for us in fiscal 2018. We are currently evaluating the impact this standard will have on our consolidated financial statements.
In June 2016, FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses. ASU 2016-13 introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale (AFS) debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. The standard will become effective for us in our fiscal 2021. We do not expect this standard to have a material impact on the consolidated financial statements.
In August 2016, FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The guidance is to be applied using a retrospective transition method to each period presented. This standard will become effective for us in our fiscal 2019. We are currently evaluating the impact this standard will have on our consolidated financial statements.
2.
Discontinued Operations and Assets Held for Sale
On
January 24, 2017
, the Company entered into an Asset and Membership Interest Purchase Agreement (the “BER Sale Agreement”) with BER Acquisition, LLC, a Delaware limited liability company formed by affiliates of Golden Gate Capital Opportunity Fund, L.P. (the “Buyer”). Pursuant to the BER Sale Agreement, subject to the satisfaction or waiver of certain conditions, the Buyer has agreed to purchase and acquire the Company’s Bob Evans Restaurants business (the “Restaurants Business”) for an aggregate purchase price of
$565,000
in cash, subject to certain adjustments set forth in the BER Sale Agreement (the “Restaurants Transaction”). The buyer is also purchasing our corporate headquarters as part of the transaction.
The Restaurants Transaction will be effected by (i) the sale of the Restaurants Business assets by the Company’s affiliates to Buyer and (ii) the sale by the Company of
fifty
percent of the equity interests in a newly formed special purpose entity that will hold specified intellectual property assets used by both the Restaurants Business and the Company’s BEF Foods food production business. As part of the Restaurants Transaction the Company is also conveying to the Buyer the majority of working capital liabilities associated with the Restaurants Business, including outstanding payables, accrued wages, and other accrued current liabilities, other than debt.
On
January 24, 2017
, the Company’s Board of Directors unanimously approved the BER Sale Agreement and the transactions contemplated thereby, including the Restaurants Transaction. The Buyer has obtained equity commitments for the full amount of the purchase price in the Restaurants Transaction from Golden Gate Capital Opportunity Fund, L.P., and the obligations of the Buyer pursuant to the BER Sale Agreement are not subject to any financing condition. The closing of the Restaurants Transaction is anticipated to occur on or prior to
April 28, 2017
, subject to regulatory approvals and other closing conditions set forth in the BER Sale Agreement.
The Company will continue to supply Bob Evans Restaurants with certain of its products under a multi-year supply agreement. Additionally, pursuant to a transition services agreement, the Company will supply certain services, primarily information technology related, to Bob Evans Restaurants and will receive certain human resource, tax and accounting services from Bob Evans Restaurants. These services will be provided at cost for a period up to
18
months, which can be further extended.
Results associated with the Restaurants Business are classified as income from discontinued operations, net of taxes, in our Consolidated Statements of Net Income. Prior year results have been recast to conform with the current presentation. Income from discontinued operations is comprised of the following:
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
(in thousands)
|
January 27, 2017
|
|
January 22, 2016
|
|
January 27, 2017
|
|
January 22, 2016
|
Net Sales
|
$
|
223,126
|
|
|
$
|
238,608
|
|
|
$
|
663,307
|
|
|
$
|
708,018
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
Cost of sales
|
59,349
|
|
|
66,255
|
|
|
170,592
|
|
|
189,447
|
|
Operating wage and fringe benefit expenses
|
92,118
|
|
|
95,785
|
|
|
272,984
|
|
|
284,696
|
|
Operating expenses
|
43,804
|
|
|
40,746
|
|
|
129,357
|
|
|
123,766
|
|
Selling, general and administrative expenses
|
19,615
|
|
|
13,551
|
|
|
45,582
|
|
|
49,854
|
|
Depreciation and amortization expense
|
12,405
|
|
|
14,831
|
|
|
36,766
|
|
|
44,150
|
|
Impairments
|
—
|
|
|
804
|
|
|
522
|
|
|
1,089
|
|
Operating (Loss) Income from discontinued operations
|
$
|
(4,165
|
)
|
|
$
|
6,636
|
|
|
$
|
7,504
|
|
|
$
|
15,016
|
|
Net interest expense
|
402
|
|
|
—
|
|
|
1,214
|
|
|
—
|
|
(Loss) Income from discontinued operations before income taxes
|
(4,567
|
)
|
|
6,636
|
|
|
6,290
|
|
|
15,016
|
|
(Benefit) Provision for income taxes
|
(2,950
|
)
|
|
121
|
|
|
(1,033
|
)
|
|
1,651
|
|
(Loss) Income from discontinued operations
|
$
|
(1,617
|
)
|
|
$
|
6,515
|
|
|
$
|
7,323
|
|
|
$
|
13,365
|
|
Selling, general and administrative expenses include corporate costs incurred directly in support of the Restaurants Business, including wage and benefit costs of corporate employees who will transfer with the Restaurants Business and legal and professional fees incurred and associated with the Restaurants Transaction. All other corporate costs are classified in results of continuing operations. We agreed to sell our corporate headquarters facility to the Buyer on a debt-free basis as part of the Restaurants Transaction, which requires us to settle outstanding borrowings on our Mortgage Loan prior to closing the Transaction. In accordance with ASC 205 - Presentation of Financial Statements, interest expense associated with the Mortgage Loan has been allocated to discontinued operations.
Assets being sold in the Transaction include all assets associated with the Restaurants Business as well as our corporate headquarters. All assets being sold and liabilities being assumed by the Buyer are classified as held for sale on our Consolidated Balance Sheet. Prior year balances have been recast to conform with the current presentation.
Assets and liabilities classified as held for sale in our Consolidated Balance Sheets are comprised of the following:
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|
|
|
|
|
|
|
|
(in thousands)
|
January 27, 2017
|
|
April 29, 2016
|
Carrying amounts of major classes of assets classified as held for sale in the Consolidated Balance Sheets
|
|
|
|
Cash
|
$
|
1,272
|
|
|
$
|
1,287
|
|
Accounts receivable, net
|
5,350
|
|
|
4,280
|
|
Inventories
|
8,055
|
|
|
7,905
|
|
Prepaid and other current assets
|
5,032
|
|
|
3,591
|
|
Net plant, property & equipment from discontinued operations
|
476,051
|
|
|
468,383
|
|
Net plant, property & equipment from continuing operations
(1)
|
3,334
|
|
|
31,644
|
|
Other assets
|
849
|
|
|
781
|
|
Total assets classified as held for sale
(1)
|
$
|
499,943
|
|
|
$
|
517,871
|
|
|
|
|
|
Carrying amounts of major classes of liabilities classified as held for sale in the Consolidated Balance Sheets
|
January 27, 2017
|
|
April 29, 2016
|
Accounts payable
|
$
|
18,242
|
|
|
$
|
21,676
|
|
Accrued property, plant and equipment purchases
|
2,149
|
|
|
1,284
|
|
Accrued non-income taxes
|
699
|
|
|
1,222
|
|
Accrued wages and related liabilities
|
9,664
|
|
|
9,988
|
|
Self-insurance reserves
|
9,116
|
|
|
8,881
|
|
Deferred gift card revenue
|
17,934
|
|
|
14,147
|
|
Other accrued expenses
|
13,503
|
|
|
18,709
|
|
Other non-current liabilities
|
5,673
|
|
|
5,474
|
|
Long-term deferred gain
|
51,784
|
|
|
53,939
|
|
Total liabilities classified as held for sale
(1)
|
$
|
128,764
|
|
|
$
|
135,320
|
|
(1)
Amounts as of
April 29, 2016
are classified as current and long-term in the Consolidated Balance Sheets based on the nature of the asset. Current assets held for sale as of
January 27, 2017
, include $
3,334
associated with a former production facility in Richardson, Texas that is not part of the Restaurants Transaction. Additionally, current assets held for sale as of
April 29, 2016
include
$28,310
of property, plant and equipment related to closed restaurants that was previously classified as held for sale as well as $
3,334
associated with the Richardson, Texas facility.
Cash classified as held for sale is petty cash held at our restaurant locations. Other non-current liabilities classified as held for sale primarily relate to our accrual of straight line rent associated with leased restaurant properties. The long-term deferred gain classified as held for sale is primarily associated with the unamortized deferred gain on the restaurant sale leaseback transaction that occurred in the fourth quarter of fiscal 2016.
3.
Long-Term Debt and Credit Arrangements
As of
January 27, 2017
, long-term debt was comprised of the outstanding balance on our Revolving Credit Facility Amended and Restated Credit Agreement ("Credit Agreement") of
$300,479
, the long term portion of our
$30,000
Mortgage Loan, the long term portion of a
$3,000
Research and Development Investment Loan ("R&D Loan") and an interest-free loan of
$1,000
, due
10
years from the date of borrowing, with imputed interest, which as a result is discounted to
$889
. Refer to the table below:
|
|
|
|
|
|
|
|
|
(in thousands)
|
January 27, 2017
|
|
April 29, 2016
|
Credit Agreement borrowings
(1)
|
$
|
300,479
|
|
|
$
|
307,000
|
|
Mortgage Loan
(1)
|
26,777
|
|
|
28,963
|
|
R&D Loan
(1)
|
1,906
|
|
|
2,219
|
|
Interest-free loan
(1)
|
889
|
|
|
875
|
|
Total borrowings
|
330,051
|
|
|
339,057
|
|
Less current portion
|
(3,425
|
)
|
|
(3,419
|
)
|
Long-term debt
|
$
|
326,626
|
|
|
$
|
335,638
|
|
(1)
The Credit Agreement, Mortgage Loan, R&D Loan and Interest-free loan mature in fiscal 2019, 2026, 2021 and 2022, respectively.
Credit Agreement Borrowings
On January 2, 2014, we entered into the Credit Agreement, which represents a syndicated secured revolving credit facility. We incurred financing costs of
$2,064
associated with this Credit Agreement, which are being amortized over the remaining term of the agreement using the straight line method, which approximates the effective interest method. As a result of the Third Amendment to the Credit Agreement, effective October 21, 2015, and discussed further below, up to
$650,000
of borrowings are available, including a letter of credit sub-facility of
$50,000
, and an accordion provision that permits the Company to request an additional
$300,000
for certain transactions, which could increase the revolving credit commitment to
$950,000
. It is secured by the stock pledges of certain material subsidiaries. Borrowings under the Credit Agreement bear interest, at the Company's option, at a rate based on LIBOR or the Base Rate, plus a margin based on the Leverage Ratio, ranging from
1.00%
to
2.75%
per annum for LIBOR, and ranging from
0.00%
to
1.75%
per annum for Base Rate. The Base Rate means, for any day, a fluctuating per annum rate of interest equal to the highest of (i) the Federal Funds Open Rate, plus
0.5%
, (ii) the Prime Rate, or (iii) the Daily LIBOR Rate, plus
1.0%
. We are also required to pay a commitment fee of
0.15%
per annum to
0.25%
per annum of the average unused portion of the total lender commitments then in effect.
In the first quarter of fiscal 2015, we entered into a First Amendment to the Credit Agreement. The terms of the Credit Agreement that were amended related to: (a) an increase to the Maximum Leverage Ratio for the period starting July 25, 2014, through July 22, 2016, (b) certain restricted payment requirements related to share repurchases, and (c) an update to the Pricing Grid, which determines variable pricing and fees, to reflect changes in the allowable maximum leverage ratio. We incurred financing costs of
$1,279
associated with this amendment, which are being amortized using the straight line method, which approximates the effective interest method.
On May 11, 2015, we entered into a Second Amendment to the Credit Agreement. The amendment had an effective date of April 24, 2015. The terms of the Credit Agreement were amended related to: (a) an increase to the Maximum Leverage Ratio for the period starting April 24, 2015, through the remaining term of the agreement, (b) a change in the restrictions related to payments for share repurchases, and (c) a change in the definition of the LIBOR and Daily LIBOR rates that are used to calculate interest on outstanding borrowings. We incurred fees of
$1,705
associated with this amendment, which were paid in the first quarter of fiscal 2016 and amortized over the remaining term of the Credit Agreement using the straight line method, which approximates the effective interest method.
In the second quarter of fiscal 2016, we entered into a Third Amendment to the Credit Agreement dated and effective as of October 21, 2015. The terms of the Credit Agreement were amended related to: (a) an increase of the level of permitted indebtedness in connection with sale and leaseback transactions of assets from
$100,000
to
$300,000
, (b) a removal of the
$150,000
share repurchase restriction during the 2016 fiscal year, (c) a decrease of the size of the facility from
$750,000
to
$650,000
, (d) a modification of the definition of the leverage ratio to account for rent expense from leases, so that the leverage ratio will be calculated as consolidated indebtedness plus
600%
of annual rent expense versus consolidated EBITDAR, and (e) an inclusion of an add back to the leverage ratio calculation for costs related to the settlement of a class action lawsuit. We incurred and paid fees of
$812
associated with this amendment, which will be amortized over the remaining term of the Credit Agreement using the straight line method, which approximates the effective interest method. In addition, as a result of lowering the borrowing capacity on the credit facility, we expensed
$480
of previously unamortized deferred financing costs related to the agreement.
Our Credit Agreement contains financial and other various affirmative and negative covenants that are typical for financings of this type. Our Credit Agreement contains financial covenants that require us to maintain a specified minimum coverage ratio of not less than
3.00
to 1.00, and a maximum leverage ratio that may not exceed
4.00
to 1.00. As of
January 27, 2017
, our minimum coverage ratio was
13.01
, and our leverage ratio was
2.66
, as defined in our Credit Agreement. Our Credit Agreement limits repurchases of our common stock and the amount of dividends that we pay to holders of our common stock in certain circumstances. The Credit Agreement also allows for a sale leaseback of our real estate up to
$300,000
, of which approximately
$51,000
is still available as of
January 27, 2017
. A breach of any of these covenants could result in a default under our Credit Agreement, in which all amounts under our Credit Agreement may become immediately due and payable, and all commitments under our Credit Agreement extend further credit may be terminated. We were in compliance with the financial covenant requirements of our Credit Agreement as of
January 27, 2017
.
As of
January 27, 2017
, we had
$300,479
outstanding on the Credit Agreement. The primary purposes of the Credit Agreement are for trade and stand-by letters of credit in the ordinary course of business as well as working capital, refinancing of existing indebtedness, if any, capital expenditures, joint ventures and acquisitions, stock repurchases and other general corporate purposes.
Mortgage Loan Borrowings
On February 9, 2016, we entered into a
$30,000
mortgage credit agreement ("Mortgage Loan") on our corporate headquarters facility. The Mortgage Loan represents a credit facility secured by our corporate headquarters real estate and building. Borrowings under the Mortgage Loan bear interest, at the Borrower's option, at a rate based on LIBOR or the Base Rate, plus an applicable rate of
4.625%
per annum for LIBOR or
3.625%
per annum for the Base Rate. The Base Rate means for any day, a fluctuating per annum rate of interest equal to the highest of (a) the Federal Funds Open Rate, plus
0.5%
, (b) the Bank of America Prime Rate, or (c) the Eurodollar Rate, plus
1.0%
. We incurred financing costs of
$1,064
associated with this borrowing, which is being amortized over the
10
year term of the agreement, and is classified as a reduction of the outstanding long-term debt liability on our Consolidated Balance Sheet. We are required to make quarterly payments of
$750
until the Mortgage Loan's maturity date. The Mortgage Loan has a maturity date of February 9, 2026.
The carrying values of our borrowings approximate their fair values due to the variable rate nature of our debt instruments including our Credit Agreement and Mortgage Loan.
As of
January 27, 2017
, we had outstanding letters of credit that totaled
$13,864
, of which
$13,564
is utilized as part of the total amount available under our Credit Agreement. If certain conditions are met under these arrangements, we would be required to satisfy the obligations in cash. Due to the nature of these arrangements and based on historical experience and future expectations, we do not expect to make any significant payment outside of the terms set forth in these arrangements.
Our combined effective interest rate for the Credit Agreement and Mortgage Loan was
2.45%
and
1.99%
for the
three months
ended
January 27, 2017
, and
January 22, 2016
, respectively, and
2.38%
and
2.05%
for the
nine months ended
January 27, 2017
and
January 22, 2016
, respectively.
Interest costs of $
396
and $
100
for the
nine months ended
January 27, 2017
and
January 22, 2016
, were capitalized in connection with our ERP system implementations, the Line 4 expansion at our Lima production facility and other IT projects. Net interest expense during
three months
ended and
nine months ended
January 27, 2017
and
January 22, 2016
was comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
(in thousands)
|
January 27, 2017
|
|
January 22, 2016
|
|
January 27, 2017
|
|
January 22, 2016
|
Interest Expense:
|
|
|
|
|
|
|
|
Variable-rate debt
(1)
|
$
|
1,918
|
|
|
$
|
2,618
|
|
|
$
|
5,724
|
|
|
$
|
8,027
|
|
Fixed-rate debt
(2)
|
302
|
|
|
444
|
|
|
1,002
|
|
|
1,819
|
|
Capitalized interest
|
(81
|
)
|
|
(50
|
)
|
|
(396
|
)
|
|
(100
|
)
|
Total Interest Expense on outstanding borrowings
|
2,139
|
|
|
3,012
|
|
|
6,330
|
|
|
9,746
|
|
Interest income:
|
|
|
|
|
|
|
|
Accretion on note receivable
(3)
|
—
|
|
|
(528
|
)
|
|
(1,133
|
)
|
|
(1,539
|
)
|
Other
(4)
|
—
|
|
|
(117
|
)
|
|
(236
|
)
|
|
(351
|
)
|
Total Interest Income
|
—
|
|
|
(645
|
)
|
|
(1,369
|
)
|
|
(1,890
|
)
|
Net Interest Expense
|
$
|
2,139
|
|
|
$
|
2,367
|
|
|
$
|
4,961
|
|
|
$
|
7,856
|
|
|
|
(1)
|
Primarily interest expense on our Credit Agreement Borrowings
|
|
|
(2)
|
Includes the amortization of debt issuance costs and a
$480
charge in the second quarter of fiscal 2016 related to the write off of unamortized debt issuance costs
|
|
|
(3)
|
Accretion on our
$30,000
note receivable, obtained as part of the sale of Mimi’s Café to Le Duff which was settled in Q3 2017 (also see Note 1 for additional information)
|
|
|
(4)
|
Primarily interest income on the
$30,000
note receivable, obtained as part of the sale of Mimi’s Café to Le Duff, which was settled in Q3 2017
|
4.
Income Taxes
The provision for income taxes is based on a current estimate of the annual effective income tax rate adjusted to reflect the impact of discrete items. The Company’s effective income tax rate from continuing operations was
34.3%
for the three months ended
January 27, 2017
, as compared to
29.2%
for the corresponding period last year. The Company's effective income tax rate was
34.3%
for the
nine months ended January 27, 2017
as compared to
31.0%
for the corresponding period last year. The higher tax rates from continuing operations for the three and nine months ended
January 27, 2017
, as compared to the corresponding periods last year, were driven primarily by the impact of yearly variances in the forecasted annual rate related to officer's life insurance and the domestic production activities deduction.
5.
Restructuring and Severance Charges
In the second quarter of fiscal 2014, we closed our BEF Foods production plant in Richardson, Texas, and in the third quarter of fiscal 2014, we closed our BEF Foods production plants in Springfield and Bidwell, Ohio. The actions to close these food production facilities were intended to increase efficiency by consolidating production to our high capacity food production facility in Sulphur Springs, Texas. In each of the fourth quarters of fiscal years
2016
,
2015
and
2014
, we recorded charges related to a reduction of personnel at our corporate support center. Restructuring costs related to continuing operations were primarily recorded in the S,G&A line of the Consolidated Statements of Net Income.
In the third quarter of fiscal 2017, we recorded additional charges of
$4,391
related to a reduction of personnel contemplated as part of the Company's overall strategic initiatives, including the planned sale of the Restaurants Business (see Note 2 for additional information). Severance charges associated with employees who work in shared service functions were recorded in the S,G&A line of the Consolidated Statements of Net Income, while charges associated with employees who supported our restaurant business were recorded in results from discontinued operations.
Liabilities associated with severance charges as of
January 27, 2017
, were
$4,239
and are recorded in the accrued wages and related liabilities line of the Consolidated Balance Sheet.
See tables below for detail of restructuring activity for the
nine months
ended
January 27, 2017
, and
January 22, 2016
, respectively:
|
|
|
|
|
(in thousands)
|
Restructuring charges
|
Balance at April 29, 2016
|
$
|
2,698
|
|
Restructuring and related severance charges incurred
(1)
|
4,391
|
|
Amounts paid
|
(2,568
|
)
|
Adjustments
|
(282
|
)
|
Balance at January 27, 2017
|
$
|
4,239
|
|
|
|
|
|
|
(in thousands)
|
Restructuring charges
|
Balance at April 24, 2015
|
$
|
3,626
|
|
Restructuring and related severance charges incurred
(1)
|
140
|
|
Amounts paid
|
(2,850
|
)
|
Adjustments
|
(568
|
)
|
Balance at January 22, 2016
|
$
|
348
|
|
(1)
Restructuring charges of
$2,087
and
$28
were recorded in continuing operations for the
nine months
ended
January 27, 2017
, and
January 22, 2016
, respectively, in the S,G&A line of the Consolidated Statements of Net Income. The remaining charges were recorded in the results of discontinued operations.
6.
Share-Based Compensation
The Stock Compensation Topic of the FASB ASC 718 ("ASC 718") requires that we measure the cost of employee services received in exchange for an equity award, such as stock options, restricted stock awards, restricted stock units and market-based performance share units, based on the estimated fair value of the award on the grant date. The cost is recognized in the income statement over the vesting period of the award on a straight-line basis with the exception of compensation cost related to awards for retirement eligible employees (as defined in the applicable plan or share grant) which is recognized immediately on the grant date. Compensation cost is recognized based on the grant date fair value estimated in accordance with ASC 718.
As of
January 27, 2017
, there were equity awards outstanding under the Amended and Restated Bob Evans Farms, Inc. 2010 Equity and Cash Incentive Plan (the “2010 Plan”), as well as previous equity plans adopted in 2006, and 1993. The types of awards that may be granted under the 2010 Plan include: stock options, stock appreciation rights, restricted stock awards ("RSAs"), restricted stock units ("RSUs"), cash incentive awards, performance share units ("PSUs"), and other awards. During the
nine months
ended
January 27, 2017
, the Company granted approximately
98,000
RSUs and
142,000
PSUs under the 2010 Plan. During the
nine months
ended
January 22, 2016
, the Company granted approximately
126,000
RSAs and RSUs and
70,000
PSUs under the 2010 Plan.
RSAs and RSUs granted under the 2010 Plan vest ratably, primarily over
three
years for employees and
one
year for nonemployee directors of the Company. The PSUs granted in fiscal years 2016 and 2017 have market-based vesting conditions and were designed to vest at the end of a
three
-year performance period if they achieve those vesting conditions.
On
January 24, 2017
, the Compensation Committee of the Board of Directors approved (i) certain modifications to outstanding equity awards held by employees of the Company, including the Company’s executive officers, and (ii) the treatment of such equity awards contingent upon the completion of the Restaurants Transaction. In accordance with the authority and power granted to the Compensation Committee under the terms of the 2010 Plan, the Compensation Committee determined to accelerate the vesting of all unvested RSUs, RSAs and PSUs then outstanding under the 2010 Plan and that the performance criteria applicable to each PSU will be deemed satisfied, in each case contingent upon and effective as of the closing of the Restaurants Transaction and delivery by the participant of a written agreement with the Company containing a general release of claims and certain restrictive covenants. The Compensation Committee’s decision applied to all of the Company’s outstanding RSUs, RSAs and PSUs granted to employees that were unvested at the time of the modification.
The Compensation Committee's decision resulted in a Type III modification, defined as a change from improbable to probable vesting conditions as per ASC 718, for certain employees terminated prior to the end of the third quarter. For Type III modified stock awards, we recalculated the fair value on the modification date (
January 24, 2017
) and accelerated the associated unrecognized stock compensation expense. Stock compensation expense for the
three months
ended
January 27, 2017
associated with the acceleration of the modified awards was
$817
. For all other employees with unvested stock awards, the acceleration of the vesting period will occur at the closing of the Restaurants Transaction. See Note 2 for additional information.
Total share-based compensation expense associated with continuing operations, included within the S,G&A line on the
Consolidated Statements of Net Income
, was
$1,293
and
$657
for the
three months
ended
January 27, 2017
, and
January 22, 2016
, and
$3,151
and
$2,235
for the
nine months
ended
January 27, 2017
, and
January 22, 2016
, respectively.
7.
Other Compensation Plans
Defined Contribution Plan:
We have a defined contribution 401(k) retirement savings plan that is available to substantially all employees who have at least
1,000
hours of service.
Nonqualified Deferred Compensation Plans:
We have
three
nonqualified deferred compensation plans, the Bob Evans Executive Deferral Plans I and II (collectively referred to as “BEEDP”) and Bob Evans Directors’ Deferral Plan (“BEDDP”), which provide certain executives and Board of Directors members, respectively, the opportunity to defer a portion of their current year salary or stock compensation to future years. A third party manages the investments of employee deferrals. Expenses related to investment results of these deferrals are based on the change in quoted market prices of the underlying investments elected by plan participants, and are recorded within S,G&A.
Obligations to participants who defer stock compensation through our deferral plans are satisfied only in Company stock. There is no change in the vesting term for stock awards that are deferred into these plans. Obligations related to these deferred stock awards are treated as "Plan A" instruments, as defined by ASC 710. These obligations are classified as equity instruments within the Capital in excess of par value line of the Consolidated Balance Sheets. No subsequent changes in fair value are recognized in the Consolidated Financial Statements for these instruments. Participants earn share-based dividend equivalents in an amount equal to the value of per-share dividends paid to common shareholders. These dividends accumulate into additional shares of common stock, and are recorded through retained earnings in the period in which dividends are paid. Vested, deferred shares are included in the denominator of basic and diluted EPS from continuing operations in accordance with ASC 260 - Earnings per Share. The dilutive impact of unvested, deferred stock awards is included in the denominator of our diluted EPS calculation from continuing operations.
Participants who defer cash compensation into our deferral plans have a range of investment options, one of which is Company stock. Obligations for participants who choose this investment election are satisfied only in shares of Company stock, while all other obligations are satisfied in cash. These share-based obligations are treated as "Plan B" instruments, as defined by ASC 710. These deferred compensation obligations are recorded as liabilities on the Consolidated Balance Sheets, in the deferred compensation line. We record compensation cost for subsequent changes in fair value of these obligations. Participants earn share-based dividend equivalents in an amount equal to the value of per-share dividends paid to common shareholders. These dividends accumulate into additional shares of common stock, and are recorded as compensation cost in the period in which the dividends are paid. At
January 27, 2017
, our deferred compensation obligation included
$1,089
of share based obligations, which represents approximately
20,000
shares. The dilutive impact of these shares is included in the denominator of our EPS calculation. Compensation cost (benefit) recognized on the adjustment of fair value for deferred awards was immaterial in the current and prior year.
Supplemental Executive Retirement Plan:
The Supplemental Executive Retirement Plan ("SERP") provides awards to a limited number of executives in the form of nonqualified deferred cash compensation. Gains and losses related to these benefits and the related investment results are recorded within the S,G&A caption in the Consolidated Statements of Net Income. The
SERP is frozen and no further persons can be added
,
and funding was reduced to a nominal amount per year for the remaining participants.
No portion of the obligations and related assets with respect to our deferred compensation plans is being transferred in connection with the sale of the Restaurant Business. See Note 2 for additional information regarding the planned divestiture of the Restaurant Business.
Deferred compensation liabilities expected to be satisfied within the next 12 months are classified as current liabilities within the accrued wages and related liabilities line of the Consolidated Balance Sheets. Our deferred compensation liabilities as of
January 27, 2017
, and
April 29, 2016
, consisted of the following:
|
|
|
|
|
|
|
|
|
(in thousands)
|
January 27, 2017
|
|
April 29, 2016
|
Liability for deferred cash obligations in BEEDP and BEDDP Plans
|
$
|
13,592
|
|
|
$
|
12,845
|
|
Liability for deferred cash obligations in SERP plan
|
5,936
|
|
|
6,271
|
|
Liability for deferred share-based obligations in BEEDP and BEDDP Plans
|
1,089
|
|
|
673
|
|
Other noncurrent compensation arrangements
|
106
|
|
|
100
|
|
Total deferred compensation liabilities
|
20,723
|
|
|
19,889
|
|
Less current portion
(1)
|
(2,576
|
)
|
|
(2,128
|
)
|
Noncurrent deferred compensation liabilities
|
$
|
18,147
|
|
|
$
|
17,761
|
|
(1)
Current portion of deferred compensation is included within the accrued wages and related liabilities line on the Consolidated Balance Sheets
The Rabbi Trust is intended to be used as a source of funds to match respective funding obligations in our nonqualified deferred compensation plans. Assets held by the Rabbi Trust are recorded on our Consolidated Balance Sheets, and include company-owned life insurance ("COLI") policies, short-term money market securities and Bob Evans common-stock. The COLI policies held by the Rabbi Trust are recorded at cash surrender value on the Rabbi Trust Assets line of Consolidated Balance Sheets and totaled
$21,540
and
$20,662
as of
January 27, 2017
, and
April 29, 2016
, respectively. The cash receipts and payments related to the COLI proceeds are included in cash flows from continuing operating activities on the Consolidated Statements of Cash Flows and changes in the cash surrender value for these assets are reflected within the S,G&A line in the Consolidated Statements of Net Income.
The short-term securities held by the Rabbi Trust are recorded at their carrying value, which approximates fair value, on the prepaid expenses and other current assets line of the Consolidated Balance Sheets and totaled
$1,658
and
$3,290
as of
January 27, 2017
, and
April 29, 2016
, respectively. All assets held by the Rabbi Trust are restricted to their use as noted above.
8.
Commitments and Contingencies
We are from time-to-time involved in ordinary and routine litigation, typically involving claims from customers, employees and others related to operational issues common to the restaurant and food manufacturing industries, and incidental to our business. Management presently believes that the ultimate outcome of these proceedings, individually or in the aggregate, will not have a material adverse effect on our financial position, cash flows or results of operations.
In the fourth quarter of fiscal 2016 we settled a class-action related to alleged violations of the Fair Labor Standards Act by misclassifying assistant managers as exempt employees and failing to pay overtime compensation during the period of time the employee worked as an assistant manager. In the first quarter of fiscal 2016 we reached an agreement in principle to resolve the litigation matter and recorded a
$10,500
charge. In the fourth quarter of fiscal 2016, the Court issued a Final Approval Order on the settlement and the appeals period expired, and we recorded a favorable adjustment of
$3,344
. The charge and adjustment are included in results from discontinued operations in our Consolidated Statements of Net Income.
Upon the closing on the sale of our Restaurants Business, the Buyer will assume the lease obligations of the Restaurants Business, including responsibility for the payment and performance obligations of leases that were included in the sale leaseback transaction of
143
of our restaurant properties in fiscal 2016. As part of the sale leaseback transaction, the Company and its wholly owned subsidiary BEF Foods, Inc. entered into payment and performance guaranties relating to the leases on such restaurant properties, which will remain in place upon the completion of the sale of our Restaurants Business. Under the terms of the guaranties the Company will remain liable for payments due under these leases if the Buyer fails to satisfy its lease obligations.
9.
Supplemental Cash Flow Information
Cash paid for income taxes and interest for the
nine months
ended
January 27, 2017
, and
January 22, 2016
, is summarized as follows:
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
(in thousands)
|
January 27, 2017
|
|
January 22, 2016
|
Income taxes paid
|
$
|
21,412
|
|
|
$
|
412
|
|
Income taxes refunded
|
(351
|
)
|
|
(12,986
|
)
|
Income taxes paid (refunded), net
|
21,061
|
|
|
(12,574
|
)
|
Interest paid
|
$
|
7,014
|
|
|
$
|
7,755
|
|
10.
Planned Acquisition
On
January 24, 2017
, the Company’s subsidiary BEF Foods, Inc. (“BEF Foods”) entered into a Stock Purchase Agreement (the “PFPC Agreement”) with Pineland Farms Potato Company, Inc., a Maine corporation (“PFPC”), the stockholders of PFPC party thereto (collectively, the “Sellers”), and Libra Foundation, as the Sellers’ Representative, and, solely for the purposes of guaranteeing the payment and performance obligations of BEF Foods thereunder, the Company. Pursuant to the PFPC Agreement, subject to the satisfaction or waiver of certain conditions, BEF Foods has agreed to purchase and acquire from the Sellers all of the equity interests of PFPC outstanding immediately prior to the closing (the “Acquisition”), in exchange for (i)
$115,000
in cash, subject to certain adjustments set forth in the PFPC Agreement, and (ii) up to an additional
$25,000
in cash as potential earn-out consideration, the payment of which is subject to the achievement of certain operating EBITDA performance milestones over a consecutive
twelve
-month period during the
24
months following the closing.
The Company’s Board of Directors unanimously approved the PFPC Agreement and the transactions contemplated thereby, including the Acquisition. The closing of the Acquisition is anticipated to occur at the beginning of our fiscal 2018, subject to regulatory approvals and other closing conditions set forth in the PFPC Agreement.
11.
Subsequent Events
On
February 28, 2017
, the Board of Directors approved a quarterly cash dividend of
$0.34
per share, payable on
March 27, 2017
, to shareholders of record at the close of business on
March 13, 2017
.
On January 24, 2017, we agreed to sell our corporate headquarters facility to the Buyer on a debt-free basis as part of the Restaurants Transaction. Accordingly, on January 31, 2017, subsequent to the end of our third quarter, we settled the remaining outstanding borrowings of the Mortgage Loan using additional borrowings from the Credit Agreement. We will accelerate unamortized debt issuance costs associated with the loan of
$973
and recognize those costs as interest expense in the fourth quarter of fiscal 2017.