Results of Operations

In this Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"), we use the terms "Bob Evans," "company," "we," "us" and "our" to collectively refer to Bob Evans Farms, Inc., a Delaware corporation, and its subsidiaries. This MD&A contains forward-looking statements that set forth our expectations and anticipated results based on management's plans and assumptions. These statements are often indicated by words such as "expects," "anticipates," "believes," "estimates," "intends" and "plans." Actual results may differ materially from those predicted by the forward-looking statements because of various factors and possible events, including the assumptions, risks and uncertainties discussed in this Annual Report on Form 10-K under the heading "Item 1A - Risk Factors." The Securities and Exchange Commission encourages companies to disclose forward-looking information so that investors can better understand a company's future prospects and make informed investment decisions. Please refer to "Part I, Item 1. Business." of this Form 10-K for more information regarding forward-looking statements.

As of April 27, 2012, we owned and operated 710 full-service restaurants, including 565 Bob Evans Restaurants in 19 states and 145 Mimi's Cafés in 24 states. Bob Evans Restaurants are primarily located in the Midwest, mid-Atlantic and Southeast regions of the United States. Mimi's Cafés are primarily located in California and other western states. Revenue in the Bob Evans Restaurants and Mimi's Café segments are recognized at the point of sale.

We produce and distribute pork sausage and a variety of complementary home-style convenience food items under the Bob Evans and Owens brand names. These food products are delivered to warehouses that distribute to grocery stores throughout the United States. We also manufacture and sell similar products to foodservice accounts, including Bob Evans Restaurants, Mimi's Café and other restaurants and food sellers.

References herein to 2012, 2011 and 2010 refer to fiscal years. All years presented are 52-week years, except for 2010, which contains 53 weeks.

General Overview

The following table reflects data for our fiscal year ended April 27, 2012, compared to the preceding two fiscal years. The consolidated information is derived from the accompanying Consolidated Statements of Income. The table also includes data for our three segments - Bob Evans Restaurants and Mimi's Cafe and Foods. The ratios presented reflect the underlying dollar values expressed as a percentage of the applicable net sales amount.

                                           Consolidated Results
                                 FY 2012          FY 2011          FY 2010
            Net sales          $ 1,654,413      $ 1,676,906      $ 1,726,804
            Operating income       107,874           88,540          106,414
            Cost of sales             30.8 %           30.4 %           29.9 %
            Operating wages           32.3 %           33.3 %           34.7 %
            Other operating           16.2 %           16.1 %           16.0 %
            S,G&A                      9.1 %            9.9 %            8.3 %
            Depr. & amort.             5.0 %            5.0 %            4.9 %

            Operating income           6.5 %            5.3 %            6.2 %

--------------------------------------------------------------------------------
                                         Bob Evans Restaurants                              Mimi's Café                                     Foods
                                FY 2012        FY 2011         FY 2010         FY 2012        FY 2011        FY 2010        FY 2012        FY 2011        FY 2010
Net sales                      $ 973,678      $ 976,666      $ 1,005,094      $ 366,015      $ 380,267      $ 405,998      $ 314,720      $ 319,973      $ 315,712
Operating income                  88,810         73,426           77,456         (1,436 )       (7,657 )        7,688         20,500         22,771         21,270
Cost of sales                       23.7 %         23.7 %           23.1 %         26.8 %         27.3 %         26.9 %         57.5 %         54.7 %         55.4 %
Operating wages                     38.1 %         39.5 %           40.3 %         37.2 %         37.1 %         38.5 %          8.8 %         10.2 %         12.2 %
Other operating                     17.3 %         17.5 %           17.2 %         22.3 %         21.9 %         21.5 %          6.1 %          5.1 %          5.3 %
S,G&A(1)                             6.8 %          6.8 %            6.8 %          7.7 %          9.4 %          5.0 %         18.1 %         19.7 %         17.4 %
Depr. & amort.                       5.0 %          5.0 %            4.9 %          6.4 %          6.4 %          6.2 %          3.0 %          3.2 %          3.0 %

Operating income                     9.1 %          7.5 %            7.7 %         -0.4 %         -2.0 %          1.9 %          6.5 %          7.1 %          6.7 %

(1) Selling, general and administrative expenses ("S,G&A")

The results for fiscal 2012, fiscal 2011 and fiscal 2010 include the impact of the following:

• Fiscal 2012, fiscal 2011 and fiscal 2010 consolidated, Bob Evans Restaurants, Mimi's Café and Foods segment results included pretax charges of $5.6 million, $15.0 million and $6.2 million, respectively, related to fixed asset impairment that is reflected in S,G&A.

• Fiscal 2012 consolidated results included the positive impact of $2.0 million as a result of eliminating a two-day early cutoff. The Bob Evans Restaurants segment and the Mimi's Café segment accounted for $1.8 million and $0.2 million of this positive impact, respectively, the impact on Bob Evans Restaurants income statement was to increase sales by $5.1 million, increase cost of sales by $1.2 million, increase operating wages by $1.3 million, increase other operating expenses by $0.4 million and increase S,G& A by $0.4 million. The impact on Mimi's Café income statement was to increase sales by $1.9 million, increase cost of sales by $0.5 million, increase operating wages by $0.9 million, increase other operating expenses by $0.1 million and increase S,G&A by $0.2 million.

• Fiscal 2012 consolidated and Mimi's Cafe segment results included $0.3 million in retirement and severance charges. Fiscal 2011 consolidated results included $1.4 million in retirement and severance charges, consisting of $0.8 million in Bob Evans Restaurants segment and $0.6 million in Mimi's Café segment. These charges are included in S,G&A.

• Fiscal 2012 consolidated and Bob Evans Restaurants segment results included $0.8 million in pretax loss on the sale of non-operating properties, which is reflected as a reduction of S,G&A.

• Fiscal 2012 consolidated and Foods segment results included $0.8 million in pretax gain on the sale of non-operating properties, which is reflected as a decrease to S,G&A.

• Fiscal 2011 consolidated and Foods segment results included $3.0 million in restructuring charges related to lean manufacturing productivity initiatives, including the discontinuation of fresh sausage operations at two facilities. These charges are included in S,G&A.

• Fiscal 2010 consolidated and Foods segment results included a $1.4 million in pretax gain on the sale of 49 percent of our corporate aircraft, which is reflected as a reduction of S,G&A.

• Fiscal 2010 consolidated and Bob Evans Restaurants included $2.5 million in pretax life insurance proceeds, which is reflected as a reduction of S,G&A.

• Fiscal 2010 consolidated and Foods segment results included a pretax charge of $1.0 million related to severance payments and retirement costs, which is reflected as an increase to S,G&A.

• Fiscal 2010 results included the positive impact of a 53rd week of operations, which contributed $6.9 million in operating income to the consolidated results; $4.3 million in operating income to Bob Evans Restaurants, $1.4 million to Mimi's Café segment and $1.2 million to the Foods segment, respectively.

• Fiscal 2010 consolidated and Bob Evans Restaurants segment results included pretax charges of $0.8 million related to severance and retirement, which is reflected as an increase to S,G&A.

The ongoing industry-wide factors most relevant to our restaurants include: the economy, sales trends, labor and fringe benefit expenses, commodity prices, energy prices, competition, same-store sales, consumer acceptance, restaurant openings and closings, governmental initiatives, food safety and weather.

Bob Evans Restaurants Segment Overview

The factors that had the greatest positive impact on Bob Evans Restaurants' performance in fiscal 2012 were pricing, improvements in same-store-sales trends, ongoing efficiency initiatives, including the actual versus theoretical food cost programs that offset commodity price increases and improvement of operating wages and other operating expenses.

In fiscal 2012, same-store sales decreased 0.6 percent compared to fiscal 2011. Although same-store sales were negative, we believe the movement toward positive same-store sales, for Bob Evans Restaurants, signals continued improvement in operations. Bob Evans Restaurants operating income was $88.8 million in fiscal 2012 compared to $73.4 million in fiscal 2011, an increase of $15.4 million. Bob Evans Restaurants operating income increase is a result of a decrease in allocated S,G&A costs of $4.1 million, ongoing efficiency initiatives, including the actual versus theoretical food cost programs that offset commodity price increases, recording two days of incremental profit of $1.8 million as a result of eliminating a two-day early cutoff and improvement of operating wages and other operating expenses.

At Bob Evans Restaurants, value messaging, menu innovation, off-premise sales layers and new restaurant development are driving growth, along with the lift provided by the Farm-Fresh Refresh remodeling initiative. In fiscal 2012, we completed 87 Farm-Fresh Refreshes at Bob Evans Restaurants. The Farm-Fresh Refresh remodeling initiative has shown improved sales and operating income in comparison to the remainder of the units, contributing approximately a 5 percent lift in sales over the non-refreshed units. The improvement in sales and operating income is a result of adding new sales layers, such as the bakeries, and retraining restaurant team members within these restaurants to operate the units more efficiently. We continue to evaluate markets for Farm-Fresh Refreshes remodels to maximize our returns on invested capital.

Mimi's Café Segment Overview

The factors that had the greatest positive impact on Mimi's Café performance in fiscal 2012 were improvements in same-store-sales trends, ongoing menu initiatives to help control costs, improvement of operating wages and a reduction of fixed asset impairment charges of $10.7 million.

Although Mimi's Café same-store sales remained negative, we are encouraged by the sequential quarterly improvement in same-store sales throughout fiscal 2012 and are focused on continuing that sales momentum.

Mimi's Café operating loss was $1.4 million in fiscal 2012 compared to a loss of $7.7 million in fiscal 2011, an improvement of $6.3 million. Mimi's improvement of operating margin is primarily the result of a reduction in fixed asset impairment charges of $10.7 in fiscal 2012, when compared to fiscal 2011, partially offset by an increase in allocated S,G&A costs of $4.1 million. The increase in the allocation of SG&A reflects the corporate support received by Mimi's Café in fiscal 2012. The offset to Mimi's Café increase in allocated shared support services is a reduction to Bob Evans Restaurants' allocation.

Our focus, at Mimi's Café, is to continue to drive sales growth through ensuring guests have a positive dining experience, streamlining its menu and focusing on value offerings, improving off-premise sales and increasing bar sales.

Foods Segment Overview

The ongoing industry-wide factors most relevant to the Foods segment include:
sow availability and cost, other commodity costs, transportation and energy costs, governmental regulations, food safety, the economy, weather, competition and consumer acceptance. The Foods segment's profitability was negatively impacted by an increase in sow costs and promotional expenses in fiscal 2012.

Sow costs represent a significant component of the Foods segment cost of sales, and the volatile nature of sow costs greatly impacts the profitability of the segment. The increase in sow costs from $57.17 per hundredweight to $61.58 per hundredweight, resulted in a cost of sales increase of $4.6 million in fiscal 2012, and is the primary reason for the increase in the cost of sales ratio from 54.7 percent to 57.5 percent in fiscal 2012.

The Foods segment experienced a decrease in operating income of $2.3 million, or 10.0 percent, in fiscal 2012 compared to a year ago, and its operating income margin decreased from 7.1 percent of net sales in fiscal 2011 to 6.5 percent of net sales in fiscal 2012. The decrease in operating income is primarily due to the increases in sow costs and promotional expenses, partially offset by a decrease in pretax severance charges of $3.0 million compared to fiscal 2011.

We are focused on delivering top line growth in the Foods segment. We expect to attain this goal through expanded distribution of side dishes, frozen and sausage product lines, increasing volume of foodservice sales which includes insourced products to Bob Evans Restaurants and Mimi's Café and in-organic opportunities.

Net Sales

Consolidated net sales decreased $22.5 million, or 1.3 percent, in fiscal 2012 compared to fiscal 2011. The fiscal 2012 decrease was the result of decreases of $3.0 million, $14.3 million and $5.3 in Bob Evans Restaurants, Mimi's Café and the Foods segment net sales, respectively.

Bob Evans Restaurants reported net sales of $973.7 million in fiscal 2012, a 0.3 percent decrease compared to $976.7 million in fiscal 2011. Same-store sales at Bob Evans Restaurants decreased 0.6 percent in fiscal 2012, with average menu prices up 1.7 percent. In fiscal 2012, Bob Evans Restaurants eliminated a two-day early cutoff resulting in additional sales of $5.1 million, as described in Note 1. The decrease in net sales is a result of declines in same-store sales, partially offset by the elimination of the two-day early cutoff. Same-store sales at Bob Evans Restaurants decreased 1.0 percent and 3.5 percent in fiscal 2011 and fiscal 2010, respectively. The same-store sales comparisons for Bob Evans Restaurants included average menu price increases of 1.7 percent and 1.9 percent in fiscal 2011 and fiscal 2010, respectively. During fiscal 2012, Bob Evans Restaurants opened four new restaurants, rebuilt three existing restaurants, remodeled 87 existing locations and closed two underperforming restaurants. One of the new Bob Evans Restaurants was opened in Arkansas, a new area of the country where we are expanding our footprint.

We continue to focus on Bob Evans Restaurants off-premise sales through carryout, catering and bakery sales. Off-premise's average guest checks were $17.12, $14.72 and $11.31 for fiscal 2012, fiscal 2011 and fiscal 2010, respectively, higher than our overall average guest checks of $8.69, $8.58 and $8.40 for fiscal 2012, fiscal 2011 and fiscal 2010, respectively. Off-premise net sales represented 10.9 percent of Bob Evans Restaurant net sales in fiscal 2012 compared to 9.6 percent and 8.2 percent in fiscal 2011 and fiscal 2010, respectively. Correspondingly, we continue to strategically move away from retail merchandise sales. Retail merchandise net sales comprised .09 percent of Bob Evans Restaurant net sales in 2012 compared to 1.0 percent and 1.7 percent in fiscal 2011 and fiscal 2010, respectively.

Mimi's Café reported net sales of $366.0 million in fiscal 2012, a 3.7 percent decrease compared to $380.3 million in fiscal 2011. Same-store sales at Mimi's decreased 4.0 percent in fiscal 2012, with average menu prices up 3.4 percent. In fiscal 2012, Mimi's Café eliminated a two-day early cutoff, resulting in additional sales of $1.9 million, as described in Note 1. The decrease in net sales is a result of declines in same-store sales, partially offset by the elimination of the two-day early cutoff. Mimi's Café same-store sales decreased 4.5 percent and 7.2 percent in fiscal 2011 and fiscal 2010, respectively. The same-store sales comparisons for Mimi's Café included average menu price increases of 2.9 percent and 2.2 percent in fiscal 2011 and fiscal 2010, respectively. During fiscal 2012, Mimi's Café performed one minor remodel and did not open, close or rebuild any restaurants.

Same-store sales computations for a given year are based on net sales of restaurants that are open for at least two years prior to the start of that year. Net sales of restaurants to be rebuilt are excluded for all periods in the same-store sales computation when construction commences on the replacement building. Net sales of closed restaurants are excluded for all periods in the same-store sales computation.

The chart below summarizes the restaurant openings and closings during the last two fiscal years for Bob Evans Restaurants and Mimi's Café:

Bob Evans Restaurants:



                               Beginning      Opened      Closed       Ending
                Fiscal 2012
                1st quarter           563           -           -          563
                2nd quarter           563           2           1          564
                3rd quarter           564           -           -          564
                4th quarter           564           2           1          565
                Fiscal 2011
                1st quarter           569           -           -          569
                2nd quarter           569           -           -          569
                3rd quarter           569           -           -          569
                4th quarter           569           2           8          563

Mimi's Café:



                               Beginning      Opened      Closed       Ending
                Fiscal 2012
                1st quarter           145           -           -          145
                2nd quarter           145           -           -          145
                3rd quarter           145           -           -          145
                4th quarter           145           -           -          145
                Fiscal 2011
                1st quarter           146           -           1          145
                2nd quarter           145           -           -          145
                3rd quarter           145           -           -          145
                4th quarter           145           -           -          145

At Bob Evans Restaurants, value messaging, menu innovation, off-premise sales layers and new restaurant development are driving growth, along with the sales lift provided by the Farm-Fresh Refresh remodeling initiative. In fiscal 2012, we completed 87 Farm-Fresh Refreshes at Bob Evans Restaurants. The Farm-Fresh Refresh initiative added a new sales layer, bakery to existing restaurants. We believe that improvement in same-store sales experienced at refreshed Bob Evans Restaurants is due to the enhanced appearance of the restaurants

Mimi's Café experienced negative same-store sales comparisons in fiscal 2012. We have seen sequential quarterly improvement in comparison during fiscal 2012 and in comparison to fiscal 2011. The same-store sales improvements are the result of value messaging, convenience, focus on improving off-premise sales and cause related marketing efforts. Mimi's Café introduced programs such as Wine Flights, Café Express To Go, Happiest Hour, Family Meals To-Go and the Go Red for Women marketing campaign. The express lunch platform, wine flights, the added off-premise dining options and marketing programs aimed at a target audience has led to the improvement in same-store sales. We are looking into strategies to continue the same-store sales improvement and drive overall top-line performance, by initiating a refresh program at Mimi's Café and implementing a similar three-course meal strategy for the evening day-part. Mimi's Café plans to leverage off of Bob Evans Restaurants' successes by using these programs to improve the guests' dining experiences.

The Foods segment's net sales decreased $5.3 million, or 1.6 percent, in fiscal 2012 versus fiscal 2011. While total pounds sold were almost flat, promotional expenses increased $4.4 million compared to fiscal 2011,as we protected our market share in the face of increased competitive pressure. Promotional expenses are recorded as a reduction to net sales. Sow costs increased from $57.17 per hundredweight to $61.58 per hundredweight, increasing cost of sales by $4.6 million in fiscal 2012. We believe initiatives such as expansion of distribution, product in-sourcing and new product innovations will enable future top line growth.

We believe there are opportunities to increase product volume by utilizing our Foods segment as a resource to deliver products to both Bob Evans Restaurants and Mimi's Café. The insourcing relationship not only benefits the Foods segment through potential increases in total pounds sold, it also offers consistency to our guests, reduces product preparation and insulates Bob Evans Restaurants and Mimi's Café from arbitrary price increases from outside suppliers.

Efficiencies gained as a result of our lean manufacturing initiatives, have enabled us to focus on product innovation in the side dish and frozen categories. These categories are successful and growing because customers want value, quality and ease of preparation for their busy lifestyles. We saw the success of side dish innovation in our launch of seasonal sides during the holiday season. We have additional major side dish and frozen product introductions planned for the summer that will expand our offerings beyond our core products. As we continue to see success in our side dish and frozen categories, we also continue to build upon our sausage category. We have completed an Every Day Low Pricing, program with a large account aimed at putting more of our products on their shelves. Additionally, we have been expanding our ready to eat sausage products which include both pork and turkey offerings. We have seen our ready to eat sales grow by more than 50 percent over the past year.

On May 29, 2012, we announced an additional phase to our plant optimization initiatives with the plan to close our ready-to-eat manufacturing plant in Bidwell, Ohio and our soup and gravy manufacturing plant in Springfield, Ohio early in fiscal 2014. We will consolidate the volume in Sulphur Springs, Texas where we will expand the current facility by more than fifty thousand square feet. The expanded facility will increase productivity and offer new product opportunities with the ability to process multiple types of proteins. We believe our plans for product innovation and the upgraded production facility positions the Foods segment for future growth.

Cost of Sales

Consolidated cost of sales (cost of materials) was 30.8 percent, 30.4 percent and 29.9 percent of net sales in fiscal 2012, fiscal 2011 and fiscal 2010, respectively.

Mimi's Café cost of sales, predominantly food cost, was 26.8 percent, 27.3 percent and 26.9 percent in fiscal 2012, fiscal 2011 and fiscal 2010, respectively. Mimi's Café cost of sales ratio decreased as a result of ongoing efficiency initiatives including the actual versus theoretical food cost program, menu rationalization and menu price increases of 3.4 percent, which were partially offset by commodity increases.

Foods segment cost of sales was 57.5 percent, 54.7 percent and 55.4 percent of net sales in fiscal 2012, fiscal 2011 and fiscal 2010, respectively. The increase in the cost of sales ratio in 2012 was the result of higher sow costs. Sow costs averaged $61.58 per hundredweight in fiscal 2012 compared to $57.17 in fiscal 2011. The year-over-year rise in sow costs resulted in an increase of about $4.6 million in cost of sales for the Foods segment compared to fiscal 2011. In fiscal 2012, promotional expenses increased by $4.4 million, when . . .