Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. BOB EVANS FARMS INC (33769) 10-Q published on Dec 06, 2017 at 12:24 pm
Reporting Period: Oct 26, 2017
Pending Acquisition by Post Holdings, Inc.: On September 18, 2017, the Company, Post Holdings, Inc., a Missouri corporation ("Post" or "Post Holdings"), and Haystack Corporation, a Delaware corporation and a wholly owned subsidiary of Post (“Merger Sub”), entered into an Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which Merger Sub will be merged with and into the Company (the "Merger"). As a result of the Merger, Merger Sub will cease to exist, and the Company will survive as a wholly owned subsidiary of Post. Upon the closing of the Merger, each share of the Company’s common stock, par value $0.01 per share (other than treasury stock and any shares of the Company’s common stock owned by the Company, Post, Merger Sub or any of their wholly owned subsidiaries, or any Company stockholder who properly demands statutory appraisal of such stockholder’s shares), will be converted into the right to receive an amount in cash equal to $77.00 without interest. Upon completion of the Merger, the Company’s common stock will no longer be publicly traded and will be delisted from the Nasdaq Global Select Market.
In the second quarter, we recorded adjustments to the acquisition fair value of certain assets and liabilities based on revisions to the preliminary third party valuation. The changes resulted in a $782 increase to property, plant and equipment, a $1,474 increase in identifiable intangible assets, a $786 increase in deferred tax liabilities, and a $1,470 decrease to goodwill. The impact of these changes to our Consolidated Statements of Net Income were immaterial.
Following the announcement of the Merger, on or around October 31, 2017, two putative class action complaints were filed by purported stockholders of the Company in the United States District Courts for the District of Delaware and the Southern District of Ohio. The cases are captioned Miller v. Bob Evans Farms, Inc., et al., Case No. 1:17-CV-01538-VAC-CJB and Franchi v. Bob Evans Farms, Inc., et al., Case No. 2:17-CV-00961-MHW-CMV (the “Actions”). The Actions name as defendants the Company and the current and certain former members of the Company’s board of directors, and one of the Actions also names as defendants Post and Merger Sub. The complaints allege, among other things, that the defendants violated Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, as amended, and certain rules promulgated thereunder by omitting or misrepresenting certain allegedly material information in the preliminary proxy statement filed with the SEC by the Company on October 24, 2017, which information the plaintiffs argue is necessary for stockholders of the Company to make an informed decision whether to vote in favor of the Merger. The complaints seek, among other things, a declaratory judgment, preliminary or permanent injunctive relief against the stockholder vote on the Merger, unspecified damages, and an award of costs, fees, and disbursements. The Company believes that the claims asserted in the Actions are without merit. However, solely in order to alleviate the costs, risks and uncertainties inherent in litigation and to provide additional information to its stockholders, the Company and the other named defendants in the complaints entered into a memorandum of understanding with the plaintiffs on November 13, 2017 to resolve the individual claims asserted in the Actions, pursuant to which the Company included certain additional disclosures in the definitive proxy statement filed with the SEC by the Company on November 17, 2017.
Total operating expenses in the six months ended October 27, 2017 were $54.4 million, or 24.0% of net sales, as compared to $58.3 million, or 32.0% of net sales in the corresponding period a year ago. Selling and distribution costs increased as compared to the prior year due to the impact of higher sales volumes. Advertising and marketing costs increased by $1.6 million as part of an incremental investment to drive increased brand awareness and to increase households purchasing in the refrigerated side-dish category. General and administrative costs were flat as compared to the prior year, which included $1.8 million of integration and IT separation costs incurred in the first six months of fiscal 2018, offset by a reduction in wage and benefit costs associated with our restructuring programs in the prior year. The Company recorded $1.8 million of amortization expense on the definite-lived intangible assets acquired as part of the Pineland business acquisition (see Note 2 for additional information). Transaction costs of $5.9 million associated with the planned merger with Post were recorded during the six months ended October 27, 2017 (see Note 12 for additional information). Impairment charges of $16.0 million were recorded in the six months ended October 28, 2016, related to a note receivable that was subsequently settled in the third quarter of fiscal 2017.
The pending Merger may cause disruption to our business or business relationships and create uncertainty surrounding our ongoing business operations, which could materially and adversely impact our business, results of operations and financial condition, regardless of whether the Merger is completed, including as a result of the following (all of which could be exacerbated by a delay in the completion of the Merger):