| Summary of Significant Accounting Policies | 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. No significant changes have occurred in the financial disclosures made in our Form 10-K for the fiscal year ended April 29, 2016 (refer to the Form 10-K for a summary of significant accounting policies followed in the preparation of the consolidated financial statements). 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 : As of October 28, 2016 , we operated 522 full-service Bob Evans Restaurants in 18 states. Bob Evans Restaurants are primarily located in the Midwest, Mid-Atlantic and Southeast regions of the United States. In the BEF Foods segment 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. We also manufacture and sell similar products to food-service accounts, including Bob Evans Restaurants and other restaurants and food sellers. Reporting Segments: We have two reporting segments: Bob Evans Restaurants and BEF Foods. The revenues from these two segments include both net sales to unaffiliated customers and intersegment net sales, which are accounted for on a basis consistent with net sales to unaffiliated customers. Intersegment net sales and other intersegment transactions have been eliminated in the consolidated financial statements. Operating income represents earnings before interest and income taxes. All direct costs related to our two reporting segments are included in segment results, while certain costs related to corporate and other functions are not allocated to our reporting segments. Revenue Recognition: Revenue in the Bob Evans Restaurants segment is recognized at the point of sale, other than revenue from the sale of gift cards, which is deferred and recognized upon redemption. Our gift cards do not have expiration dates or inactivity fees. All revenue is presented net of sales tax collections. We recognize revenue from gift cards when they are redeemed by the customer. In addition, we recognize income on unredeemed gift cards (“gift card breakage”) based on historical redemption patterns, referred to as the redemption recognition method. Gift card breakage is recognized proportionately over the period of redemption in net sales in the Consolidated Statements of Net Income. The liability for unredeemed gift cards is included in deferred revenue on the Consolidated Balance Sheets, and was $12,051 and $14,147 at October 28, 2016 , and April 29, 2016 , respectively. Revenue in the BEF Foods segment 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 (Trade) Spending: We engage in promotional (sales incentive) programs in the form of promotional discounts and coupons at Bob Evans Restaurants, and off-invoice deductions, billbacks, and cooperative advertising at BEF Foods. Costs associated with these programs are classified as a reduction of gross sales in the period in which the sale occurs. Promotional spending at Bob Evans Restaurants, primarily comprised of discounts taken on dine-in sales, was $8,519 and $9,504 for the three months ended October 28, 2016 , and October 23, 2015 , respectively, and $15,293 and $18,253 for the six months ended October 28, 2016 , and October 23, 2015 , respectively. Promotional spending at BEF Foods, primarily comprised of off-invoice deductions and billbacks, was $19,330 and $15,655 for the three months ended October 28, 2016 , and October 23, 2015 , respectively, and $35,621 and $30,408 for the six months ended October 28, 2016 , and October 23, 2015 , respectively. Shipping and Handling costs: Expenditures related to shipping our BEF Foods' products to our customers are expensed when incurred. Shipping and handling costs were $4,092 and $3,322 for the three months ended October 28, 2016 , and October 23, 2015 , respectively, and $7,404 and $7,191 for the six months ended October 28, 2016 , and October 23, 2015 , 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 for Bob Evans Restaurants consist primarily of credit card receivables, while accounts receivable for BEF Foods consist 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 $871 and $534 as of October 28, 2016 , and April 29, 2016 , respectively. Accounts receivable was reduced by $11,410 and $4,916 as of October 28, 2016 , and April 29, 2016 , respectively, related to promotional incentives that reduce what is owed to the Company from certain BEF Foods' customers. Notes Receivable: As a result of the sale of Mimi’s Café to Le Duff America, Inc. ("Le Duff"), we received a Promissory Note ("the Note") for $30,000 . The Note has an annual interest rate of 1.5% , a term of seven years and a principal and interest payment due in February 2020. Partial prepayments are required prior to maturity if the buyer's business reaches certain levels of EBITDA during specified periods. No partial prepayments were received on the Note as of October 28, 2016 . Repayment of the Note is not guaranteed by the parent company. Our right to repayment under the Note is subordinated to third-party lenders as well as other funding that may be provided by the parent company. In the event of a sale or liquidation of the Mimi’s Café restaurant chain or the entity that owns it by its parent company, our right to repayment may be subordinated to payments owed to the parent company and potentially reduced based on the funds available for repayment. The note was originally valued using a discounted cash flow model. The Company recognized accretion income on the Note of $574 and $513 for the three months ended October 28, 2016, and October 23, 2015, respectively, and $1,133 and $1,011 for the six months ended October 28, 2016 , and October 23, 2015 , 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, in accordance with the provisions of the Note, 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 represents the difference between the previous carrying value and the revised expected cash flows. In accordance with the provisions of ASC 310 - Receivables, the Company will continue to evaluate the expected cash flows throughout the remaining term of the Note. The Note is recorded on the notes receivable line of the Consolidated Balance sheet, and is $6,256 and $20,886 as of October 28, 2016 , and April 29, 2016 , respectively. Inventories: We value our Bob Evans Restaurants' inventories at the lower of first-in, first-out cost (“FIFO”) or market and our BEF Foods' 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 ( $16,276 at October 28, 2016 , and $13,815 at April 29, 2016 ) and finished goods ( $17,059 at October 28, 2016 , and $11,183 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 for nearly all capitalized assets, although some assets purchased prior to fiscal 1995 continue to be depreciated using accelerated methods. Depreciation is calculated at rates adequate to amortize costs over the estimated useful lives of buildings and improvements ( 5 to 50 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 was $17,606 and $20,067 in the three months ended October 28, 2016 , and October 23, 2015 , respectively, and $35,140 and $40,181 for the six months ended October 28, 2016 , and October 23, 2015 , respectively. During the three months and six months ended October 28, 2016 , we capitalized internal labor costs of $855 and $1,782 , respectively, primarily related to the roll out of our new Restaurant point of sale system and other IT projects including the second phase of our ERP system. During the three months and six months ended October 23, 2015 , we capitalized internal labor costs of $548 and $1,052 , respectively, primarily related to the second phase of our 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. See Note 5 for further information. Assets for 21 nonoperating Bob Evans Restaurants' locations and our former Richardson, Texas, plant location totaling $23,887 are classified as current assets held for sale in the Consolidated Balance Sheet as of October 28, 2016 . Assets for 30 nonoperating Bob Evans Restaurants' locations, as well as our Richardson, Texas, location totaling $31,644 are classified as current assets held for sale in the Consolidated Balance Sheet as of April 29, 2016 . Goodwill and Other Intangible Assets: Goodwill and other intangible assets, which primarily represents the cost in excess of fair market value of net assets acquired, was $19,751 and $19,829 as of October 28, 2016 , and April 29, 2016 , respectively. The goodwill and other intangible assets are related to the BEF Foods segment. 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 7 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. The denominator is based on the following weighted-average shares outstanding: Three Months Ended Six Months Ended (in thousands) October 28, 2016 October 23, 2015 October 28, 2016 October 23, 2015 Basic 19,825 22,115 19,807 22,421 Dilutive shares 139 118 175 151 Diluted 19,964 22,233 19,982 22,572 In the three months and six months ended October 28, 2016 , 337,218 and 326,605 shares of common stock were excluded from the diluted EPS calculations because they were anti-dilutive. In the three months and six months ended October 23, 2015 , 251,799 and 241,455 shares of common stock were excluded from the diluted EPS calculations because they were anti-dilutive. Dividends: In the three months ended October 28, 2016 , and October 23, 2015 , the Company paid a quarterly dividend equal to $0.34 and $0.31 , respectively, per share on our outstanding common stock. In the six months ended October 28, 2016 , and October 23, 2015 , the Company paid dividends equal to $0.68 and $0.62 , 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: Six Months Ended (in thousands) October 28, 2016 October 23, 2015 Cash dividends paid to common stockholders $ 13,452 $ 14,040 Dividend equivalent rights 253 213 Total dividends $ 13,705 $ 14,253 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 for Bob Evans Restaurants. Accrued non-income taxes were $14,246 and $15,696 as of October 28, 2016 , 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 $18,429 and $20,169 as of October 28, 2016 , and April 29, 2016 , respectively. Deferred gains on sale leaseback transactions: In fiscal 2016, we entered into sale leaseback transactions for two of our BEF Foods' production facilities and 143 Bob Evans Restaurants' properties. Each of the BEF Foods and Bob Evans Restaurants transactions included 20 year lease terms with additional renewal periods, as well as payment and performance guaranties. Gains on the sale of properties related to the sale leaseback transactions that were completed in fiscal 2016 were deferred and are recognized on a straight-line basis over the initial term of the lease. Gains of $ 56,868 and $ 2,305 were recorded and deferred as part of our fiscal 2016 Bob Evans Restaurants and BEF Foods sale leaseback transactions, respectively. Amortization of the deferred gains was $736 and $1,472 in the three months and six months ended October 28, 2016 , respectively, and is recorded as a reduction to rent expense in the other operating expenses line of the Consolidated Statements of Net Income. See the table below for a summary of the unamortized deferred gains as of October 28, 2016 , and April 29, 2016 , respectively: (in thousands) October 28, 2016 April 29, 2016 Unamortized gain related to Bob Evans Restaurants' sale leaseback transaction $ 55,329 $ 56,743 Unamortized gain related to BEF Foods' sale leaseback transaction 2,187 2,245 Total unamortized gains related to sale leaseback transactions 57,516 58,988 Less current portion (1) (2,952 ) (2,952 ) Non-current deferred sale leaseback gains $ 54,564 $ 56,036 (1) Current portion of unamortized sale leaseback gains is recorded to the other accrued expenses line on the Consolidated Balance Sheets. Advertising Costs: Media advertising is expensed at the time the media first airs. We expense all other advertising costs as incurred. Advertising expense was $10,206 and $10,033 in the three months ended October 28, 2016 , and October 23, 2015 , respectively, and $19,465 and $19,026 for the six months ended October 28, 2016 , and October 23, 2015 , respectively. Approximately 70% of year-to-date advertising costs were incurred in the Bob Evans Restaurants segment. 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 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 is effective for us in fiscal 2019. We are currently evaluating which method we will use and the revenue recognition impact this guidance will have once implemented. 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 is 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 is 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 be 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 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 is 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 is effective for us in our fiscal 2021. We do not expect this update 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 is effective for us in our fiscal 2019. We are currently evaluating the impact this standard will have on our consolidated financial statements. |
