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Bob Evans 1Q net income down on charges

Sarah Skidmore Sell, AP Business Writer

Bob Evans Farms Inc. reported Monday that its fiscal first-quarter net income fell nearly 40 percent due to large one-time costs.

The Columbus, Ohio, company was weighed down by impairment, restructuring and other unusual costs as it reshapes its business. Like many of its peers, Bob Evans has struggled with a period of sluggish sales as consumers have become more selective about spending and eating out.

The company owns its namesake Bob Evans restaurant chain, which it has invested heavily in revamping to draw more customers. It agreed in January to sell its Mimi's Cafe chain for $50 million to LeDuff America Inc. It also sells some food products under the Bob Evans and Owens brand names. The company recently bolstered that business with the acquisition of Kettle Creations, which makes mashed potatoes, macaroni and cheese and other side dishes.

Bob Evans Chairman and CEO Steve Davis said Monday that he is confident in the company's transformation efforts. The company also backed its full-year forecast, increased its dividend and announced plans to open a new store concept.

The company said that it is working with AVI Food Systems Inc. to develop and license "Bob Evans Express," restaurants located in nontraditional sites such as hospitals, universities, airports and corporate cafeterias.

The company reported net income of $9.2 million, or 33 cents per share, for its quarter that ended July 26. That is down from $15 million, or 53 cents per share, in its first quarter last year. After adjusting for unusual items, the company earned 58 cents per share versus 59 cents per share last year from continuing operations.

Its total revenue increased to $329.4 million from $323.4 million, as gains from the Kettle Creations acquisition offset weaker revenue from Bob Evans restaurants.

Analysts polled by FactSet were anticipating adjusted earnings of 57 cents per share on revenue of $334.8 million.

Revenue from its namesake restaurants open at least a year fell 0.6 percent, due largely to the impact of closure days to accommodate remodels. This is typically considered a key measure of performance as it strips away the impact of recently opened or closed stores.

Bob Evans also coped with higher costs for bacon and other pork products, as well as bread, cheese and other food costs. The company said it redesigned its menu at the end of the quarter to focus on high-margin items such as breakfasts, beverages and less on costly proteins.

The company said that despite the ongoing changes and higher food costs, it still expects to earn between $2.60 and $2.67 per share on an adjusted basis for the year; analysts had forecast $2.69 per share. It also forecast full-year revenue of $1.4 billion, in line with analyst expectations.

Bob Evans also said that it is increasing its quarterly dividend by 12.7 percent to 31 cents per share from 27.5 cents per share. The new dividend is payable on Sept. 16 to shareholders of record as of Sept. 3.

Shares of the company, which has 560 restaurants in 19 states, slipped 57 cents in after-hours trading following the report. Its stock fell 17 cents to close regular trading at $47.57 and is up 19 percent since this time last year.