<< Previous :: Next >> By Date :: Top Recent :: Top 30 days :: Top 365 days :: Back

Third Quarter 2012 Financial Results For Einstein Noah Restaurant Group

2012-11-13

Send

PDF

Bookmark

Text Size:

Einstein Noah Restaurant Group Net income improves compared to the third quarter last year by realizing operational improvements in cost of goods and manufacturing.

Einstein Noah Restaurant Group, Inc. (NASDAQ: BAGL), operating under the Einstein Bros.® Bagels, Noah's New York Bagels®, and Manhattan Bagel® brands, reported financial results for the third quarter ended October 2, 2012.

Highlights for the Third Quarter 2012 Compared to the Third Quarter 2011:

Total revenues increased 1.9% to $105.5 million from $103.5 million, reflecting a 3.4% increase in Company-owned restaurant sales.
System-wide comparable store sales increased 0.2%, the sixth consecutive quarter of positive trends.
Net income was $3.4 million (+20.4% vs. prior year), or $0.20 per diluted share, compared to a net income of $2.8 million, or $0.17 per diluted share, in the year-ago period. In the third quarter of 2012, the Company incurred $0.3 million, or $0.01 per diluted share, in pre-tax expenses related to the strategic alternatives review process.
Adjusted EBITDA increased 13.6% to $11.7 million from $10.3 million. (*)
Year-to-date operating cash flow increased 23.2% to $31.3 million from $25.4 million.

Jeff O’Neill, President and Chief Executive Officer, stated, “We improved our net income compared to the third quarter last year by realizing operational improvements in cost of goods and manufacturing, and delivered our sixth consecutive quarter of comparable store sales growth despite some softness related to the July 4^th Holiday. We attribute the continuation of our positive top-line trend to favorable product mix, expanded catering, and specialty beverage sales which we supported through our ongoing marketing investments. Our 2012 development plans are on target with our previously guided range, and we are excited to continue expanding our national brand presence through a combination of committed franchise and license partners and disciplined company unit growth.”

Third Quarter 2012 Financial Results

For the third quarter ended October 2, 2012, system-wide comparable store sales increased 0.2%, reflecting 4.1% growth in average check that was driven by a combination of price and favorable product mix, offset by comparable transactions. Total revenues increased 1.9% to $105.5 million from $103.5 million, reflecting a 3.4% increase in Company-owned restaurant revenues, while manufacturing and commissary revenues decreased 14.4% reflecting the planned commissary closures earlier this year.

Manufacturing and commissary gross margin as a percentage of manufacturing and commissary revenues increased from 8.7% to 23.6% driven by benefits from various cost initiatives, but particularly, the closure of all five commissaries by the end of the first quarter of 2012.

Overall, gross profit was $20.7 million in the third quarter of 2012 compared to $18.9 million in the third quarter of 2011, and as a percentage of total revenues, increased 150 basis points to 19.7% from 18.2% in the year-ago period.

General and administrative expenses increased to $9.1 million in the third quarter of 2012 from $8.6 million in the third quarter of 2011, primarily due to higher variable incentive compensation plans.

Adjusted EBITDA rose 13.6% to $11.7 million in the third quarter of 2012 compared to $10.3 million in the third quarter of 2011. (*)

Income from operations increased by $1.1 million to $6.3 million in the third quarter of 2012.

Net income was $3.4 million (+20.4% vs. prior year), or $0.20 per diluted share, compared to a net income of $2.8 million, or $0.17 per diluted share, in the year-ago period. In the third quarter of 2012, the Company incurred $0.3 million, or $0.01 per diluted share, in pre-tax expenses related to the strategic alternative review process. In the third quarter of 2011, the Company incurred $0.1 million in pre-tax restructuring expenses in relation to the closure of one of its commissaries.

* A reconciliation of the non-GAAP measure to the nearest GAAP measure can be found in the accompanying tables below.

Restaurant Development

As of October 2, 2012, there were 797 Einstein Bros.® Bagels, Noah's New York Bagels®, and Manhattan Bagel® branded restaurants in operation. During the third quarter of 2012, the Company opened 20 restaurants and ended the quarter with 450 Company-owned and operated restaurants, while franchisees and licensees ended the period with 94 and 253 restaurants, respectively.

Fiscal Year 2012 Guidelines

The Company is providing the following updated guidelines for the 52-week period and as noted.

66 to 72 system-wide openings, including 14 to 15 Company-owned restaurants, 12 to 14 franchise restaurants, and 40 to 43 license restaurants.
Capital expenditures of $24 million to $26 million.
Commodity inflation of 2% to 3%.
The Company has secured price protection for all of its wheat and coffee requirements, respectively.
General and administrative expenses of $10 million to $11 million for the fourth quarter, which includes incentive compensation expenditures.
An annual effective tax rate of approximately 39%; however, the Company will continue to only pay minimal cash-taxes for the next several years.

For fiscal year 2013, the Company has secured price protection for approximately 33% of its wheat and 96% of its coffee requirements, respectively.


EINSTEIN NOAH RESTAURANT GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except earnings per share and related share information)


	13 weeks ended				Increase/
	(in thousands)				(Decrease)
	September 27,		October 2,		2012
	2011		2012		vs. 2011

Revenues:
Company-owned restaurant sales	$	92,311	$	95,418	3.4	%
Manufacturing and commissary revenues		8,766		7,507	(14.4	%)
Franchise and license related revenues		2,455		2,569	4.6	%
Total revenues		103,532		105,494	1.9	%

Cost of sales (exclusive of depreciation and amortization shown separately below):
Company-owned restaurant costs
Cost of goods sold		27,693		26,676	(3.7	%)
Labor costs		27,329		27,906	2.1	%
Rent and related expenses		9,926		10,761	8.4	%
Other operating costs		10,145		10,649	5.0	%
Marketing costs		1,567		3,017	92.5	%
Total company-owned restaurant costs		76,660		79,009	3.1	%

Manufacturing and commissary costs		8,004		5,738	(28.3	%)
Total cost of sales		84,664		84,747	0.1	%

Gross margin:
Company-owned restaurant		15,651		16,409	4.8	%
Manufacturing and commissary		762		1,769	132.2	%
Franchise and license		2,455		2,569	4.6	%
Total gross margin		18,868		20,747	10.0	%

Operating expenses:
General and administrative expenses		8,610		9,091	5.6	%
Depreciation and amortization		4,836		5,014	3.7	%
Restructuring expenses		121		-	**
Strategic alternatives expense		-		250	**
Other operating expenses, net		47		60	27.7	%
Income from operations		5,254		6,332	20.5	%

Interest expense, net		772		744	(3.6	%)
Income before income taxes		4,482		5,588	24.7	%
Provision for income taxes		1,647		2,174	32.0	%
Net income	$	2,835	$	3,414	20.4	%

Net income – Basic	$	0.17	$	0.20	17.6	%
Net income – Diluted	$	0.17	$	0.20	17.6	%
Cash dividend declared per common share	$	0.125	$	0.125	0.0	%

Weighted average number of common shares outstanding:
Basic		16,785,934		16,961,298	1.0	%
Diluted		17,013,086		17,292,305	1.6	%

** Not meaningful


EINSTEIN NOAH RESTAURANT GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
PERCENTAGE RELATIONSHIP TO TOTAL REVENUES
(unaudited)

	13 weeks ended
	(percent of total revenue)
	September 27,		October 2,
	2011		2012

Revenues:
Company-owned restaurant sales	89.2	%	90.5	%
Manufacturing and commissary revenues	8.4	%	7.1	%
Franchise and license related revenues	2.4	%	2.4	%
Total revenues	100.0	%	100.0	%

Cost of sales (exclusive of depreciation and amortization shown separately below):
Company-owned restaurant costs (1)
Cost of goods sold	30.0	%	27.9	%
Labor costs	29.6	%	29.2	%
Rent and related expenses	10.7	%	11.3	%
Other operating costs	11.0	%	11.2	%
Marketing costs	1.7	%	3.2	%
Total company-owned restaurant costs	83.0	%	82.8	%

Manufacturing and commissary costs (2)	91.3	%	76.4	%
Total cost of sales	81.8	%	80.3	%

Gross margin:
Company-owned restaurant (1)	17.0	%	17.2	%
Manufacturing and commissary (2)	8.7	%	23.6	%
Franchise and license	100.0	%	100.0	%
Total gross margin	18.2	%	19.7	%

Operating expenses:
General and administrative expenses	8.3	%	8.6	%
Depreciation and amortization	4.7	%	4.8	%
Restructuring expenses	0.1	%	0.0	%
Strategic alternatives expense	0.0	%	0.2	%
Other operating expenses, net	0.0	%	0.1	%
Income from operations	5.1	%	6.0	%

Interest expense, net	0.8	%	0.7	%
Income before income taxes	4.3	%	5.3	%
Provision for income taxes	1.6	%	2.1	%
Net income	2.7	%	3.2	%

(1) As a percentage of company-owned restaurant sales
(2) As a percentage of manufacturing and commissary revenues


EINSTEIN NOAH RESTAURANT GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except earnings per share and related share information)

	39 weeks ended					Increase/
	(in thousands)					(Decrease)
	September 27,			October 2,		2012
	2011			2012		vs. 2011

Revenues:
Company-owned restaurant sales	$	275,723		$	285,264	3.5	%
Manufacturing and commissary revenues		25,541			23,196	(9.2	%)
Franchise and license related revenues		7,191			7,900	9.9	%
Total revenues		308,455			316,360	2.6	%

Cost of sales (exclusive of depreciation and amortization shown separately below):
Company-owned restaurant costs
Cost of goods sold		81,971			80,048	(2.3	%)
Labor costs		81,514			82,982	1.8	%
Rent and related expenses		30,205			31,508	4.3	%
Other operating costs		29,485			30,152	2.3	%
Marketing costs		7,793			9,007	15.6	%
Total company-owned restaurant costs		230,968			233,697	1.2	%

Manufacturing and commissary costs		22,452			18,215	(18.9	%)
Total cost of sales		253,420			251,912	(0.6	%)

Gross margin:
Company-owned restaurant		44,755			51,567	15.2	%
Manufacturing and commissary		3,089			4,981	61.2	%
Franchise and license		7,191			7,900	9.9	%
Total gross margin		55,035			64,448	17.1	%

Operating expenses:
General and administrative expenses		27,314			30,206	10.6	%
Depreciation and amortization		13,984			14,792	5.8	%
Restructuring expenses		334			480	43.7	%
Strategic alternatives expense		-			685	**
Other operating (income) expenses, net		(776	)		319	(141.1	%)
Income from operations		14,179			17,966	26.7	%

Interest expense, net		2,507			2,322	(7.4	%)
Income before income taxes		11,672			15,644	34.0	%
Provision for income taxes		4,589			6,070	32.3	%
Net income	$	7,083		$	9,574	35.2	%

Net income – Basic	$	0.43		$	0.57	32.6	%
Net income – Diluted	$	0.42		$	0.56	33.3	%
Cash dividends declared per common share	$	0.250		$	0.375	50.0	%

Weighted average number of common shares outstanding:
Basic		16,588,907			16,915,756	2.0	%
Diluted		16,856,275			17,200,034	2.0	%

** Not meaningful


EINSTEIN NOAH RESTAURANT GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except earnings per share and related share information)
(unaudited)

	39 weeks ended
	(percent of total revenue)
	September 27,		October 2,
	2011		2012

Revenues:
Company-owned restaurant sales	89.4	%	90.2	%
Manufacturing and commissary revenues	8.3	%	7.3	%
Franchise and license related revenues	2.3	%	2.5	%
Total revenues	100.0	%	100.0	%

Cost of sales (exclusive of depreciation and amortization shown separately below):
Company-owned restaurant costs (1)
Cost of goods sold	29.7	%	28.1	%
Labor costs	29.6	%	29.1	%
Rent and related expenses	11.0	%	11.0	%
Other operating costs	10.7	%	10.6	%
Marketing costs	2.8	%	3.1	%
Total company-owned restaurant costs	83.8	%	81.9	%

Manufacturing and commissary costs (2)	87.9	%	78.5	%
Total cost of sales	82.2	%	79.6	%

Gross margin:
Company-owned restaurant	16.2	%	18.1	%
Manufacturing and commissary	12.1	%	21.5	%
Franchise and license	100.0	%	100.0	%
Total gross margin	17.8	%	20.4	%

Operating expenses:
General and administrative expenses	8.9	%	9.6	%
Depreciation and amortization	4.5	%	4.7	%
Restructuring expenses	0.1	%	0.2	%
Strategic alternatives expense	0.0	%	0.2	%
Other operating (income) expenses, net	(0.3	%)	0.1	%
Income from operations	4.6	%	5.6	%

Interest expense, net	0.8	%	0.7	%
Income before income taxes	3.8	%	4.9	%
Provision for income taxes	1.5	%	1.9	%
Net income	2.3	%	3.0	%

(1) As a percentage of Company-owned restaurant sales
(2) As a percentage of manufacturing revenues

* Not applicable
** Not meaningful


EINSTEIN NOAH RESTAURANT GROUP, INC.
SELECTED FINANCIAL INFORMATION
(in thousands)


Selected Consolidated Balance Sheet Information:	January 3, 2012			October 2, 2012
Cash and cash equivalents, end of period	$	8,652		$	12,668
Property, plant and equipment, net		59,017			58,841
Total assets		204,732			207,563
Total debt		74,200			68,575
Total liabilities		116,919			113,910


	39 weeks ended
Selected Consolidated Cash Flow Information:	September 27, 2011			October 2, 2012
Net cash provided by operating activities	$	25,429		$	31,376
Net cash used in investing activities		(11,955	)		(16,170	)
Net cash used in financing activities		(14,971	)		(11,190	)
Free cash flow (cash provided by operating
activities less cash used in investing activities)		13,474			15,206


Reconciliation of GAAP to Non-GAAP Measures:	13 weeks ended				39 weeks ended
	September 27,		October 2,		September 27,			October 2,
	2011		2012		2011			2012

	(in thousands)
Net income	$	2,835	$	3,414	$	7,083		$	9,574
Adjustments to net income:
Interest expense, net		772		744		2,507			2,322
Provision for income taxes		1,647		2,174		4,589			6,070
Depreciation and amortization		4,836		5,014		13,984			14,792
Restructuring expenses		121		-		334			480
Strategic alternative expenses		-		250		-			685
Other operating expense (income), net		47		60		(776	)		319

Adjusted EBITDA	$	10,258	$	11,656	$	27,721		$	34,242


EINSTEIN NOAH RESTAURANT GROUP, INC.
SELECTED FINANCIAL INFORMATION


	13 weeks ended October 2, 2012
	Company
	Owned		Franchised		Licensed		Total
Consolidated Total
Total beginning balance	448		95		240		783
Opened restaurants	2		1		17		20
Closed restaurants	(1	)	(1	)	(4	)	(6	)
Refranchising, Net	1		(1	)	-		-
Total ending balance	450		94		253		797



	Trailing 12 Months Activity
	Company
	Owned		Franchised		Licensed		Total
Consolidated Total
Beginning balance - September 27, 2011	431		94		233		758
Opened restaurants	11		11		30		52
Closed restaurants	(1	)	(2	)	(10	)	(13	)
Refranchising, Net	9		(9	)	-		-
Ending balance - October 2, 2012	450		94		253		797