PHILIP TASHO
PORTFOLIO MANAGER
ABN AMRO/TAMRO SMALL CAP VALUE FUND

COMPANY: Bob Evans Farms
TICKER: BOBE (Nasdaq)
PRICE: $29.46 (as of 4 p.m. yesterday)
52-WEEK RANGE: $19.91-$29.65
MARKET CAPITALIZATION: $1.05 billion

Philip Tasho is a portfolio manager with the ABN AMRO/TAMRO Small Cap Fund (ATASX), which has returned 28.2% annually over the last three years and 12.7% on the year to date. Bob Evans Farms owns and operates more than 650 full-service restaurants. Mr. Tasho spoke to David Dalley of The New York Sun about the company’s prospects.

What does the company do?

They have a casual dining restaurant business, and they also manufacture and distribute pork sausage and other food products. The bulk of their earn ings come from the restaurants.They’re concentrated in the Midwest, in the East, and in the Southwest. In terms of restaurants, they have two concepts Bob Evans Farms and Mimi’s Cafe.

Why is the stock a good buy?

This is a company that’s restructur ing. Its earnings have declined over the last few years from rising costs. They were hurt by their demographics – con sumers in the lower end of the income range have been hurt by higher gas prices, etc., and that’s affected earnings There’s also more competition in their space now than there used to be.

What’s changed?

Well their restructuring has had a big impact. It’s a two-fold story. They brought in a new CEO named Larry Corbin. Part of the problem with the old CEO is that his experience was in the food manufacturing area, and he wasn’t really a restaurant person. Larry, on the other hand, is a man who has worked with the company for the last 40 years in the restaurant business – he was the senior vice president of the restaurant division – and he knows the company well.

The first thing he did was to control costs, and put a more rational operating plan in place. His focus is on making sure that the execution is correct. That means improving the quality, cleanliness, and customer service at the restaurants. Those issues are incredibly important for a restaurant business in order for it to retain customers.

The other thing he did was to focus more on the breakfast menu, the reason being that breakfast is a higher margin meal relative to lunch or dinner.

What will growth be like going forward?

We’re looking for about 10% to 15% earnings growth over the next year. Part of that will be a result of the operating changes. Another thing driving growth is new restaurants.

What are the fundamentals like?

The P/E at the moment looks a little high because earnings are depressed – it’s currently around 24 for the fiscal year ending April 2006. They should earn roughly $1.22 in April. We’re expecting them to earn approximately $1.40 to $1.45 for April 2007. That’s another 15% plus gain in the next fiscal year.

What are the biggest risks to that forecast?

Right now execution is the main risk for this company. The hope is that the operational controls that they’ve put in place carry forward.