Third Quarter 2012 Financial Results For Einstein Noah Restaurant Group

2012-11-13
  • Send
  • PDF
  • Print
  • Bookmark
  • Text Size:
  •  Repost This Article
  • 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 4th 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  


    Logos, product and company names mentioned are the property of their respective owners.

  • Send
  • PDF
  • Print
  • Bookmark
  • Go Back
  • Text Size:

  • comments powered by Disqus
    Ads by Nevistas

    Newsletters
    Restaurant
    Industry News
     
    Hospitality
    Newsletter
     
    Hospitality
    Trends
     
    Hospitality
    Technology
     
    Your Email Address
     
    Advertise Here