New World Restaurant Group Announces 2006 4th Quarter and Full Year Financial Results
Net income of $6.0 million, or $0.54 per diluted share, in Q4
Selected Highlights:
* Net income of $6.0 million, or $0.54 per diluted share, in Q4
* Q4 operating income up 102% to $10.9 million
* 9th consecutive quarter of positive operating income
* Full year operating income up 129% to $21.4 million
* Comparable store sales up 4.7% in quarter, 4.5% in 2006
* 9th straight quarter of positive comparable store sales
* $4.6 million in cash generated from operations in Q4, $14.0 million for full year
New World Restaurant Group, Inc. today announced fourth quarter net income of $6.0 million, or $0.54 per diluted share, along with strong results for its full year ended January 2, 2007.
FOURTH QUARTER RESULTS
New World reported net income of $6.0 million, or $0.57 per basic and $0.54 per diluted share, in the fourth quarter versus a net loss of $723,000, or $0.07 per basic and diluted share, in the same quarter last year. It was the Company's second consecutive profitable quarter.
The Company reported revenue of $99.2 million in the 13-week fourth quarter of 2006 as compared with $103.9 million in the 14-week fourth quarter of 2005, which included an additional $6.1 million in sales due to the extra week. Comparable store sales grew by 4.7% in the fourth quarter -- the Company's ninth consecutive positive quarter in that category.
Gross profit in the fourth quarter increased to $23.5 million, up 9.0% from $21.5 million in the same quarter last year and up 29.6% from $18.1 million in the third quarter of 2006. The year-over-year margin growth would have been significantly higher on a 52-week to 52-week comparative basis. This improvement reflected stronger restaurant gross profit partially offset by negative margins from the Company's manufacturing and commissary operations. Although still negative, New World's manufacturing and commissary margins began to improve in the fourth quarter due to implementation of price increases to some third party customers as well as the consolidation and improved efficiency of the Company's commissary operations. Management believes these changes instituted in the fourth quarter will lead to continued improvement in manufacturing and commissary margins.
Total operating expenses declined by 22.0% in the fourth quarter to $12.6 million from $16.1 million in the same quarter a year ago. General and administrative expenses declined by 19.4% to $7.4 million from $9.2 million. This reduction was due primarily to lower bonus payments to corporate staff, the 2006 fourth quarter having 13 weeks versus 14 weeks in the 2005 fourth quarter, which resulted in a corresponding reduction in G&A costs, and finally, a $550,000 refund on sales tax overpayments. Depreciation and amortization expense declined by 59.7% in the fourth quarter, to $2.7 million from $6.7 million in the same quarter a year ago, as all amortizing intangible assets and a large portion of other assets became fully amortized at the end of the second quarter. New World recognized $2.1 million in impairment-related charges in the fourth quarter related to a write-down on bagel manufacturing equipment to be purchased from the Company by its contract manufacturer at a mutually agreed upon fair value. Loss on sale, disposal or abandonment of assets increased to $287,000 in the fourth quarter from $45,000 in the same quarter last year.
Income from operations increased 102% to $10.9 million in the fourth quarter from $5.4 million in the same quarter last year. The Company generated $4.6 million in cash from operations in the fourth quarter.
Interest expense in the fourth quarter was reduced by $1.3 million, to $4.9 million from $6.2 million in the same quarter last year. This improvement reflected the successful first quarter debt refinancing in which the Company's interest rate on all debt was reduced from 13.9% to an annualized weighted-average effective interest rate of 10.3% as of January 2, 2007.
Cash balances at January 2, 2007, improved to $5.5 million in cash and cash equivalents and $2.7 million in restricted cash versus $1.6 million in cash and cash equivalents and $3.1 million in restricted cash at fiscal year end on January 3, 2006. The Company invested $13.2 million in cash in 2006 for new property and equipment, including new stores and store equipment, remodeling of existing stores, manufacturing operations and general corporate purposes.
"We are very pleased with our strong financial results in the second half of 2006, particularly in the fourth quarter when we reported more than $6.0 million in net income and generated nearly $4.6 million cash from operations," said Paul Murphy, president and CEO. "The quality of the Company's financial performance is now beginning to reflect the quality of the food products and customer service that our restaurants have always been known for. Our challenge now is to extend these positive trends and achieve sustainable financial performance and improved value for our shareholders, customers and employees.
"In 2007 our focus will be on continuously improving the dining experience for our customers," Murphy added. "We intend to continue to remodel select restaurants, introduce fresh new product offerings and bundlings, enhance our ordering systems, and hire and train committed restaurant management and staff -- all with an eye toward increasing restaurant traffic and revenues. We plan to accelerate our new store development activities, to increase store openings from five new company stores in 2006 to 10 to 15 new company stores in 2007, including Einstein Bros. stores in Atlanta, Chicago, Las Vegas, and Phoenix; and Noah's New York Bagels stores in Portland, Seattle and in California."
Rick Dutkiewicz, chief financial officer, added, "We continue to strengthen the Company's financial results as a result of steady same store sales growth combined with a lower overall cost structure. The first quarter debt refinancing was a major milestone, cutting 363 basis points off our annualized weighted average effective interest rate on all debt, which now stands at 10.3%. The second milestone, in mid-year, was the sharp reduction in depreciation and amortization costs, which are expected to be in the $12 million to $15 million per year range moving forward. These factors, combined with our focus on adding additional company-owned, franchised and licensed locations, our efforts to increase sales in existing company-owned restaurants, as well as stable G&A expenses, put New World in good position to sustain solid financial results."
2006 FULL YEAR RESULTS
In 2006 the Company reported 52 weeks of operating results as compared with 53 weeks in 2005. Despite one less week of revenue contribution, New World achieved an increase in revenue during 2006, to $390.0 million from $389.1 million in 2005. This increase was attributed primarily to 4.5% growth in comparable store sales for the year. When calculated on a comparative 52-week basis for both 2006 and 2005, restaurant sales for 2006 increased 1.9%.
The Company generated $78.6 million in gross profit in 2006, up 6.7% from $73.7 million in 2005. Restaurant gross profit grew by 10.7% for the year -- to $73.5 million from $66.4 million -- partially offset by negative margins in the Company's manufacturing operations. Included in the $7.1 million increase in gross profit was $6.0 million in food and labor cost savings due to the fact that 2006 had 52 weeks of operations versus 53 weeks in 2005.
Total operating expenses declined by 11.1% in 2006 to $57.2 million from $64.3 million in 2005. This improvement was led by a 35.6% decline in depreciation and amortization expense, to $16.9 million from $26.3 million in 2005. As of July 4, 2006, all of the Company's amortizing intangible assets became fully amortized and a substantial portion of its other assets became fully depreciated. Consequently, the Company expects its annual depreciation and amortization expense to be in a range of $12 million to $15 million. The sharp decline in depreciation and amortization more than offset relatively small increases in general and administrative expense, which was up 3.8% to $37.5 million from $36.1 million; impairment-related charges, which increased 41.5% to $2.3 million from $1.6 million; and loss on sale, disposal or abandonment of assets, which grew to $493,000 from $314,000 in 2005.
Income from operations increased 129% to $21.4 million in 2006 from $9.4 million in 2005. The Company generated $14.0 million in cash from operations in 2006, up 575% from $2.1 million in 2005.
Interest expense in 2006 was reduced by 17.5%, or $4.1 million, to $19.6 million from $23.7 million in 2005, reflecting the reduction of the Company's annualized weighted average effective interest rate on debt to 10.3% from 13.9%. Other expense for the year included $8.8 million in costs associated with the redemption and prepayment of the Company's $160.0 million in notes, which were refinanced during the first quarter of 2006 in a move designed to reduce long-term interest costs, improve cash flow and increase financial flexibility.
Net loss in 2006, which included the $8.8 million in note redemption and prepayment costs, was $6.9 million, or $0.66 per basic and diluted share, a 51% improvement over the net loss of $14.0 million, or $1.42 per basic and diluted share, in 2005.
* Net income of $6.0 million, or $0.54 per diluted share, in Q4
* Q4 operating income up 102% to $10.9 million
* 9th consecutive quarter of positive operating income
* Full year operating income up 129% to $21.4 million
* Comparable store sales up 4.7% in quarter, 4.5% in 2006
* 9th straight quarter of positive comparable store sales
* $4.6 million in cash generated from operations in Q4, $14.0 million for full year
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New World Restaurant Group, Inc. today announced fourth quarter net income of $6.0 million, or $0.54 per diluted share, along with strong results for its full year ended January 2, 2007.
FOURTH QUARTER RESULTS
New World reported net income of $6.0 million, or $0.57 per basic and $0.54 per diluted share, in the fourth quarter versus a net loss of $723,000, or $0.07 per basic and diluted share, in the same quarter last year. It was the Company's second consecutive profitable quarter.
The Company reported revenue of $99.2 million in the 13-week fourth quarter of 2006 as compared with $103.9 million in the 14-week fourth quarter of 2005, which included an additional $6.1 million in sales due to the extra week. Comparable store sales grew by 4.7% in the fourth quarter -- the Company's ninth consecutive positive quarter in that category.
Gross profit in the fourth quarter increased to $23.5 million, up 9.0% from $21.5 million in the same quarter last year and up 29.6% from $18.1 million in the third quarter of 2006. The year-over-year margin growth would have been significantly higher on a 52-week to 52-week comparative basis. This improvement reflected stronger restaurant gross profit partially offset by negative margins from the Company's manufacturing and commissary operations. Although still negative, New World's manufacturing and commissary margins began to improve in the fourth quarter due to implementation of price increases to some third party customers as well as the consolidation and improved efficiency of the Company's commissary operations. Management believes these changes instituted in the fourth quarter will lead to continued improvement in manufacturing and commissary margins.
Total operating expenses declined by 22.0% in the fourth quarter to $12.6 million from $16.1 million in the same quarter a year ago. General and administrative expenses declined by 19.4% to $7.4 million from $9.2 million. This reduction was due primarily to lower bonus payments to corporate staff, the 2006 fourth quarter having 13 weeks versus 14 weeks in the 2005 fourth quarter, which resulted in a corresponding reduction in G&A costs, and finally, a $550,000 refund on sales tax overpayments. Depreciation and amortization expense declined by 59.7% in the fourth quarter, to $2.7 million from $6.7 million in the same quarter a year ago, as all amortizing intangible assets and a large portion of other assets became fully amortized at the end of the second quarter. New World recognized $2.1 million in impairment-related charges in the fourth quarter related to a write-down on bagel manufacturing equipment to be purchased from the Company by its contract manufacturer at a mutually agreed upon fair value. Loss on sale, disposal or abandonment of assets increased to $287,000 in the fourth quarter from $45,000 in the same quarter last year.
Income from operations increased 102% to $10.9 million in the fourth quarter from $5.4 million in the same quarter last year. The Company generated $4.6 million in cash from operations in the fourth quarter.
Interest expense in the fourth quarter was reduced by $1.3 million, to $4.9 million from $6.2 million in the same quarter last year. This improvement reflected the successful first quarter debt refinancing in which the Company's interest rate on all debt was reduced from 13.9% to an annualized weighted-average effective interest rate of 10.3% as of January 2, 2007.
Cash balances at January 2, 2007, improved to $5.5 million in cash and cash equivalents and $2.7 million in restricted cash versus $1.6 million in cash and cash equivalents and $3.1 million in restricted cash at fiscal year end on January 3, 2006. The Company invested $13.2 million in cash in 2006 for new property and equipment, including new stores and store equipment, remodeling of existing stores, manufacturing operations and general corporate purposes.
"We are very pleased with our strong financial results in the second half of 2006, particularly in the fourth quarter when we reported more than $6.0 million in net income and generated nearly $4.6 million cash from operations," said Paul Murphy, president and CEO. "The quality of the Company's financial performance is now beginning to reflect the quality of the food products and customer service that our restaurants have always been known for. Our challenge now is to extend these positive trends and achieve sustainable financial performance and improved value for our shareholders, customers and employees.
"In 2007 our focus will be on continuously improving the dining experience for our customers," Murphy added. "We intend to continue to remodel select restaurants, introduce fresh new product offerings and bundlings, enhance our ordering systems, and hire and train committed restaurant management and staff -- all with an eye toward increasing restaurant traffic and revenues. We plan to accelerate our new store development activities, to increase store openings from five new company stores in 2006 to 10 to 15 new company stores in 2007, including Einstein Bros. stores in Atlanta, Chicago, Las Vegas, and Phoenix; and Noah's New York Bagels stores in Portland, Seattle and in California."
Rick Dutkiewicz, chief financial officer, added, "We continue to strengthen the Company's financial results as a result of steady same store sales growth combined with a lower overall cost structure. The first quarter debt refinancing was a major milestone, cutting 363 basis points off our annualized weighted average effective interest rate on all debt, which now stands at 10.3%. The second milestone, in mid-year, was the sharp reduction in depreciation and amortization costs, which are expected to be in the $12 million to $15 million per year range moving forward. These factors, combined with our focus on adding additional company-owned, franchised and licensed locations, our efforts to increase sales in existing company-owned restaurants, as well as stable G&A expenses, put New World in good position to sustain solid financial results."
2006 FULL YEAR RESULTS
In 2006 the Company reported 52 weeks of operating results as compared with 53 weeks in 2005. Despite one less week of revenue contribution, New World achieved an increase in revenue during 2006, to $390.0 million from $389.1 million in 2005. This increase was attributed primarily to 4.5% growth in comparable store sales for the year. When calculated on a comparative 52-week basis for both 2006 and 2005, restaurant sales for 2006 increased 1.9%.
The Company generated $78.6 million in gross profit in 2006, up 6.7% from $73.7 million in 2005. Restaurant gross profit grew by 10.7% for the year -- to $73.5 million from $66.4 million -- partially offset by negative margins in the Company's manufacturing operations. Included in the $7.1 million increase in gross profit was $6.0 million in food and labor cost savings due to the fact that 2006 had 52 weeks of operations versus 53 weeks in 2005.
Total operating expenses declined by 11.1% in 2006 to $57.2 million from $64.3 million in 2005. This improvement was led by a 35.6% decline in depreciation and amortization expense, to $16.9 million from $26.3 million in 2005. As of July 4, 2006, all of the Company's amortizing intangible assets became fully amortized and a substantial portion of its other assets became fully depreciated. Consequently, the Company expects its annual depreciation and amortization expense to be in a range of $12 million to $15 million. The sharp decline in depreciation and amortization more than offset relatively small increases in general and administrative expense, which was up 3.8% to $37.5 million from $36.1 million; impairment-related charges, which increased 41.5% to $2.3 million from $1.6 million; and loss on sale, disposal or abandonment of assets, which grew to $493,000 from $314,000 in 2005.
Income from operations increased 129% to $21.4 million in 2006 from $9.4 million in 2005. The Company generated $14.0 million in cash from operations in 2006, up 575% from $2.1 million in 2005.
Interest expense in 2006 was reduced by 17.5%, or $4.1 million, to $19.6 million from $23.7 million in 2005, reflecting the reduction of the Company's annualized weighted average effective interest rate on debt to 10.3% from 13.9%. Other expense for the year included $8.8 million in costs associated with the redemption and prepayment of the Company's $160.0 million in notes, which were refinanced during the first quarter of 2006 in a move designed to reduce long-term interest costs, improve cash flow and increase financial flexibility.
Net loss in 2006, which included the $8.8 million in note redemption and prepayment costs, was $6.9 million, or $0.66 per basic and diluted share, a 51% improvement over the net loss of $14.0 million, or $1.42 per basic and diluted share, in 2005.
