Einstein Noah Restaurant Group Reports First Quarter 2010 Financial Results

System-wide comparable store sales improve sequentially and year to year, Total gross margin improves 230 basis points to 18.7%, Redeemed $13.2 million of Series Z Preferred Stock

Einstein Noah Restaurant Group, Inc. (NASDAQ: BAGL), the quick-casual segment of the restaurant industry operating under the Einstein Bros.® Bagels, Noah's New York Bagels®, and Manhattan Bagel® brands, reported financial results for the first quarter ended March 30, 2010.

Selected Highlights for the First Quarter 2010 Compared to the First Quarter 2009:

  • Total revenues rose slightly to $100.8 million from $100.4 million.
  • Total gross margin improved 230 basis points to 18.7% due to strong cost controls as well as a substantial improvement in manufacturing and commissary profitability.
  • Adjusted EBITDA improved to $8.7 million from $7.1 million.*
  • Adjusted net income and adjusted EPS on a dilutive basis improved to $1.5 million and $0.09, respectively, from $1.2 million and $0.07, respectively.*
  • Net income was $0.6 million and diluted EPS was $0.03 for the first quarter of 2010.
  • Redeemed $13.2 million in Series Z Preferred Stock.

Jeff O’Neill, Chief Executive Officer and President of Einstein Noah, stated, “Our first quarter performance underscores our successful execution of key sales and cost control strategies, and builds on our strong foundation of long-term growth opportunities. For the quarter, product innovation and creative promotions drove improvement in system-wide comparable sales and transactions, and we were pleased that consumers responded positively to our check building efforts despite intensifying competition in the breakfast daypart. We also improved our gross margins through our supply chain initiatives, and realized efficiencies in our manufacturing and store-level operations, which together facilitated 25.9% growth in adjusted net income for the period.”

O’Neill continued, “Our cash flow generation is enabling us to meet or exceed our financial obligations, and is a major contributor to a strong and flexible capital structure. We intend to stay focused on this metric as we move toward a more asset light business model, characterized by accelerated franchise and licensing development and limited Company expansion. We believe this strategy is the surest means to maximize shareholder value over time.”

First Quarter 2010 Financial Results

For the first quarter ended March 30, 2010, system-wide comparable store sales, turned positive to +0.1% for the first time in five quarters. Total revenues rose slightly to $100.8 million vs. $100.4 million in the first quarter of 2009. Company-owned restaurant sales similarly grew modestly, as the Company benefitted from a net increase of five additional company-owned restaurants since March 31, 2009. Company-owned comparable store sales were down slightly at -0.2%, but showed a sequential improvement from the -1.7% decrease in the fourth quarter of 2009.

Marketing initiatives increased $1.5 million compared to the prior-year period, as the Company launched its marketing investments last year in mid-February, whereas in the first quarter of 2010, increased marketing efforts were incurred over the entire three-month period. Company-owned restaurant gross profit was $15.3 million, or 16.9% of restaurant sales in the first quarter of 2010, compared to $13.5 million, or 14.9% of restaurant sales, in the first quarter of 2009.

As a percentage of company-owned restaurant sales, cost of goods sold was favorable by 200 basis points in the first quarter of 2010 compared to last year. Labor costs, as a percentage of company-owned restaurant sales, were favorable by 110 basis points in the first quarter of 2010 compared to the first quarter of 2009 due largely to savings from labor initiatives and decreased health benefit costs.

New Units and Development

Restaurant openings during the first quarter of 2010 consisted of 10 outlets, including three Einstein Bros. company-owned restaurants, one Manhattan Bagel and one Einstein Bros. franchise restaurants, and five Einstein Bros. licensed restaurants. One company-owned restaurant and one licensed restaurant were also closed during the period.

The Company benefitted from a net increase of eight additional franchise restaurants and 25 license restaurants since March 31, 2009. The effect of the new locations helped drive franchise and license related revenues up 16.7% to $2.2 million in the first quarter of 2010 from $1.8 million in the first quarter of 2009.

Other Operating Items

Manufacturing and commissary revenues fell modestly to $8.0 million in the first quarter of 2010 vs. $8.1 million, while gross profit grew 18.7% to $1.3 million, compared to $1.1 million in the first quarter of 2009. The substantial improvement in gross profit was attributed to lower raw ingredient costs as well as production and labor efficiencies at the Company’s bagel manufacturing facility.

Adjusted EBITDA increased $1.6 million to $8.7 million in the first quarter of 2010, compared to $7.1 million in the first quarter of 2009. The 22.3% increase in adjusted EBITDA is attributable to the improvements previously mentioned.

Adjusted net income increased to $1.5 million, or $0.09 in adjusted EPS on a dilutive basis, in the first quarter of 2010, compared to $1.2 million, or $0.07 in adjusted EPS on a dilutive basis, in the first quarter of 2009.

The Company currently estimates a 2010 annual tax rate of 43.6%, excluding the impact of the modification of the Series Z. As previously disclosed, the 2009 annual tax rate of 41.3% excluded all changes in the valuation allowance. Most of the recorded tax expense represents the benefit realized from the Company’s NOL carryforwards and the Company will continue to only pay minimal cash-taxes for the next several years.

* A reconciliation of all non-GAAP measures (Adjusted EBITDA, adjusted net income and adjusted earnings per share on a dilutive basis) to GAAP measures presented can be found in the accompanying tables below.

During the first quarter of 2010, the Company extended the redemption date for its Series Z Preferred stock held by Halpern Denny III, L.P. and committed to redeem all remaining outstanding shares, inclusive of the accrued additional redemption price, on or before June 30, 2011. The Company redeemed $13.2 million plus additional redemption in the first quarter of 2010 and expects $12 million to $15 million of the Series Z Preferred stock to be outstanding on June 30, 2010. The previous redemption date was June 30, 2010. The amended agreement had an impact of $0.9 million during the quarter resulting in net income of $0.6 million and diluted EPS of $0.03. (See the accompanying tables below).

    13 weeks ended
March 31,   March 30,
2009 2010

(in thousands, except earnings per
share and related share information)
Net income available to common stockholders $ 1,850 $ 570
Adjustments for:
Change in tax valuation allowance (659 ) -
Adjustment for Series Z modification   -     929
Adjusted net income $ 1,191   $ 1,499
 
Weighted average number of common shares outstanding:
Basic 16,025,935 16,467,072
Diluted 16,216,152 16,765,609
 
Net income per common share – Basic $ 0.12 $ 0.03
Adjustments for:
Change in tax valuation allowance $ (0.05 ) $ -
Adjustment for Series Z modification $ - $ 0.06
Adjusted net income per common share – Basic $ 0.07 $ 0.09
 
Net income per common share – Diluted $ 0.11 $ 0.03
Adjustments for:
Change in tax valuation allowance $ (0.04 ) $ -
Adjustment for Series Z modification $ - $ 0.06
Adjusted net income per common share – Diluted $ 0.07 $ 0.09
 
 
13 weeks ended
March 31, March 30,
2009 2010
(in thousands)
Net income $ 1,850 $ 620
Adjustments to net income:
Interest expense, net 1,190 1,751
Provision for income taxes 77 1,158
Depreciation and amortization 4,033 4,266
Adjustment for Series Z modification - 929
Other operating expenses   (1 )   19
Earnings before interest, taxes, depreciation,
amortization and other (Adjusted EBITDA) $ 7,149   $ 8,743

 

EINSTEIN NOAH RESTAURANT GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except earnings per share and related share information)
(unaudited)
       
13 weeks ended Increase/
(dollars in thousands) (Decrease)
March 31, March 30, 2010
2009 2010 vs. 2009
Revenues:
Company-owned restaurant sales $ 90,454 $ 90,691 0.3 %
Manufacturing and commissary revenues 8,127 7,971 (1.9 %)
Franchise and license related revenues   1,842     2,150   16.7 %
Total revenues 100,423 100,812 0.4 %
 
Cost of sales:
Company-owned restaurant costs
Cost of goods sold 27,419 25,706 (6.2 %)
Labor costs 28,645 27,780 (3.0 %)
Other operating costs 9,574 8,997 (6.0 %)
Rent and related, and marketing costs   11,359     12,884   13.4 %
Total company-owned restaurant costs 76,997 75,367 (2.1 %)
 
Manufacturing and commissary costs   6,997     6,630   (5.2 %)
Total cost of sales 83,994 81,997 (2.4 %)
 
Gross profit:
Company-owned restaurant 13,457 15,324 13.9 %
Manufacturing and commissary 1,130 1,341 18.7 %
Franchise and license   1,842     2,150   16.7 %
Total gross profit 16,429 18,815 14.5 %
 
Operating expenses:
General and administrative expenses 9,280 10,072 8.5 %
Depreciation and amortization 4,033 4,266 5.8 %
Other operating expenses   (1 )   19   **
Income from operations 3,117 4,458 43.0 %
 
Interest expense, net 1,190 1,751 47.1 %
Adjustment for Series Z modification   -     929   **
 
Income before income taxes 1,927 1,778 (7.7 %)
Provision for income taxes   77     1,158   1403.9 %
Net income $ 1,850   $ 620   (66.5 %)
 
Net income $ 1,850 $ 620 (66.5 %)
Less: Additional redemption on mezzanine equity   -     (50 ) **
Net income available to common stockholders $ 1,850   $ 570   (69.2 %)
 
 
** not meaningful

 

EINSTEIN NOAH RESTAURANT GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
PERCENTAGE RELATIONSHIP TO TOTAL REVENUES
(unaudited)
     
13 weeks ended
(percent of total revenue)
March 31, March 30,
2009 2010
Revenues:
Company-owned restaurant sales 90.1 % 90.0 %
Manufacturing and commissary revenues 8.1 % 7.9 %
Franchise and license related revenues 1.8 % 2.1 %
Total revenues 100.0 % 100.0 %
 
Cost of sales:
Company-owned restaurant costs (1)
Cost of goods sold 30.3 % 28.3 %
Labor costs 31.7 % 30.6 %
Other operating costs 10.6 % 9.9 %
Rent and related, and marketing costs 12.6 % 14.2 %
Total company-owned restaurant costs 85.1 % 83.1 %
 
Manufacturing and commissary costs (2) 86.1 % 83.2 %
Total cost of sales 83.6 % 81.3 %
 
Gross margin:
Company-owned restaurant (1) 14.9 % 16.9 %
Manufacturing and commissary (2) 13.9 % 16.8 %
Franchise and license 100.0 % 100.0 %
Total gross margin 16.4 % 18.7 %
 
Operating expenses:
General and administrative expenses 9.2 % 10.0 %
Depreciation and amortization 4.0 % 4.2 %
Other operating expenses (income) 0.0 % 0.0 %
Income from operations 3.1 % 4.4 %
 
Interest expense, net 1.2 % 1.7 %
Adjustment for Series Z modification 0.0 % 0.9 %
 
Income before income taxes 1.9 % 1.8 %
Provision for income taxes 0.1 % 1.1 %
Net income 1.8 % 0.6 %
 
Net income 1.8 % 0.6 %
Less: Additional redemption on mezzanine equity 0.0 % (0.0 %)
Net income available to common stockholders 1.8 % 0.6 %
 
 
(1) As a percentage of company-owned restaurant sales
(2) As a percentage of manufacturing and commissary revenues
* not applicable
** not meaningful

 

EINSTEIN NOAH RESTAURANT GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share information)
(Unaudited)
   
December 29, March 30,
2009 2010
ASSETS
Current assets:
Cash and cash equivalents $ 9,885 $ 10,766
Restricted cash 508 547
Accounts receivable 5,629 5,674
Inventories 5,513 5,003
Current deferred income tax assets 7,184 7,029
Prepaid expenses 5,682 6,903
Other current assets   73     73  
Total current assets 34,474 35,995
 
Property, plant and equipment, net 58,682 58,616
Trademarks and other intangibles, net 63,831 63,831
Goodwill 4,981 4,981
Long-term deferred income tax assets 46,206 45,209
Debt issuance costs and other assets, net   3,047     2,900  
 
Total assets $ 211,221   $ 211,532  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 4,147 $ 6,138
Accrued expenses and other current liabilities 20,633 23,170
Current portion of long-term debt 5,234 11,900
Current portion of obligations under capital leases 22 20
Mandatorily redeemable, Series Z Preferred Stock, $.001 par
value, $1,000 per share liquidation value; 57,000 shares
authorized; 32,194 and 9,495 shares outstanding   32,194     9,351  
 
Total current liabilities 62,230 50,579
 
Long-term debt 74,553 74,328
Long-term obligations under capital leases 19 15
Other liabilities   12,133     12,328  
 
Total liabilities   148,935     137,250  
 
Commitments and contingencies
 
Series Z Preferred Stock, $.001 par value, $1,000 per share
liquidation value; 9,494 shares outstanding - 10,567
 
Stockholders’ equity:
Series A junior participating preferred stock, 700,000 shares
authorized; no shares issued and outstanding - -
Common stock, $.001 par value; 25,000,000 shares authorized;
16,461,123 and 16,470,719 shares issued and outstanding 16 16
Additional paid-in capital 266,928 267,293
Accumulated other comprehensive loss, net of income tax (1,277 ) (833 )
Accumulated deficit   (203,381 )   (202,761 )
Total stockholders’ equity   62,286     63,715  
 
Total liabilities and stockholders’ equity $ 211,221   $ 211,532  

 

EINSTEIN NOAH RESTAURANT GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 
  13 weeks ended
March 31,   March 30,
2009 2010
OPERATING ACTIVITIES:
Net income $ 1,850 $ 620
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 4,033 4,266
Deferred income tax expense - 1,152
Stock-based compensation expense 255 383
Loss (gain) on disposal of assets (1 ) 19
Adjustment for Series Z modification - 929
Additional redemption on mezzanine equity - (50 )
Provision for losses on accounts receivable 47 35
Amortization of debt issuance and debt discount costs 144 145
Changes in operating assets and liabilities:
Restricted cash 54 (39 )
Accounts receivable (49 ) (80 )
Accounts payable and accrued expenses 2,023 5,293
Other assets and liabilities   146     (514 )
 
Net cash provided by operating activities 8,502 12,159
 
INVESTING ACTIVITIES:
Purchase of property and equipment   (3,699 )   (4,540 )
 
Net cash used in investing activities (3,699 ) (4,540 )
 
FINANCING ACTIVITIES:
Payments under capital lease obligations (22 ) (6 )
Repayments under the term loan (7,638 ) (4,559 )
Proceeds from line of credit - 11,000
Redemptions under Series Z
Preferred Stock - (13,205 )
Proceeds upon stock option exercises   -     32  
 
Net cash used in financing activities (7,660 ) (6,738 )
 
Net (decrease) increase in cash and cash equivalents (2,857 ) 881
Cash and cash equivalents, beginning of period   24,216     9,885  
Cash and cash equivalents, end of period $ 21,359   $ 10,766  

 


Source: Einstein Noah Restaurant Group / Nevistas

More News:


My Trip

My Password Reset

To reset your password, please enter your email address below. An email containing further instructions will be immediately sent to the email address associated with your account.

OR

Register as Traveler

OR

Register as Local
Register as Tour Guide

OR

Close
Yes No
CONFIRM CHANGE TIME
Yes No

To top