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Einstein Noah Restaurant Group Reports Second Quarter 2012 Financial Results

The Company uses company-owned comparable store sales, franchise and license sales and the resulting system-wide sales information internally in connection with restaurant development decisions, planning, and budgeting analyses. The Company believes comparable store sales information is useful in assessing consumer acceptance of our brands; facilitates an understanding of our financial performance and the overall direction and trends of sales and operating income; helps the Company appreciate the effectiveness of its advertising and marketing initiatives; and provides information that is relevant for comparison within the industry.

Comparable store sales percentages are non-GAAP financial measures, which should not be considered in isolation or as a substitute for other measures of performance prepared in accordance with GAAP, and may not be equivalent to comparable store sales as defined or used by other companies. The Company does not record franchise or license restaurant sales as revenues. However, royalty revenues are calculated based on a percentage of franchise and license restaurant sales, as reported by the franchisees or licensees.

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)
June 28, July 3, 2012
  2011     2012   vs. 2011
 
Revenues:
Company-owned restaurant sales $ 93,613 $ 96,399 3.0 %
Manufacturing and commissary revenues 7,797 7,239 (7.2 %)
Franchise and license related revenues   2,267     2,355   3.9 %
Total revenues 103,677 105,993 2.2 %
 

Cost of sales (exclusive of

depreciation and amortization shown separately below):

Company-owned restaurant costs
Cost of goods sold 28,164 27,003 (4.1 %)
Labor costs 27,156 28,208 3.9 %
Rent and related expenses 10,023 10,470 4.5 %
Other operating costs 10,226 10,176 (0.5 %)
Marketing costs   2,924     3,486   19.2 %
Total company-owned restaurant costs 78,493 79,343 1.1 %
 
Manufacturing and commissary costs   6,865     5,581   (18.7 %)
Total cost of sales 85,358 84,924 (0.5 %)
 
Gross margin:
Company-owned restaurant 15,120 17,056 12.8 %
Manufacturing and commissary 932 1,658 77.9 %
Franchise and license   2,267     2,355   3.9 %
Total gross margin 18,319 21,069 15.0 %
 
Operating expenses:
General and administrative expenses 8,615 10,032 16.4 %
Depreciation and amortization 4,607 5,011 8.8 %
Restructuring expenses - (74 )

**

Strategic alternatives expenses - 435 **
Other operating (income) expenses, net   (936 )   75   (108.0 %)
Income from operations 6,033 5,590 (7.3 %)
 
Interest expense, net   823     778   (5.5 %)
Income before income taxes 5,210 4,812 (7.6 %)
Provision for income taxes   2,130     1,856   (12.9 %)
Net income $ 3,080   $ 2,956   (4.0 %)
 
Net income – Basic $ 0.18 $ 0.17 (5.6 %)
Net income – Diluted $ 0.18 $ 0.17 (5.6 %)
Cash dividend declared per common share $ 0.125 $ 0.125 0.0 %
 
Weighted average number of common shares outstanding:
Basic 16,725,827 16,935,195 1.3 %
Diluted 17,004,316 17,213,322 1.2 %
 
** Not meaningful

EINSTEIN NOAH RESTAURANT GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

PERCENTAGE RELATIONSHIP TO TOTAL REVENUES

(unaudited)

    13 weeks ended
(percent of total revenue)
June 28,   July 3,
2011 2012
 
Revenues:
Company-owned restaurant sales 90.3 % 91.0 %
Manufacturing and commissary revenues 7.5 % 6.8 %
Franchise and license related revenues 2.2 % 2.2 %
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 30.1 % 28.0 %
Labor costs 29.0 % 29.3 %
Rent and related expenses 10.7 % 10.8 %
Other operating costs 10.9 % 10.6 %
Marketing costs 3.1 % 3.6 %
Total company-owned restaurant costs 83.8 % 82.3 %
 
Manufacturing and commissary costs (2) 88.0 % 77.1 %
Total cost of sales 82.3 % 80.1 %
 
Gross margin:
Company-owned restaurant (1) 16.2 % 17.7 %
Manufacturing and commissary (2) 12.0 % 22.9 %
Franchise and license 100.0 % 100.0 %
Total gross margin 17.7 % 19.9 %
 
Operating expenses:
General and administrative expenses 8.3 % 9.5 %
Depreciation and amortization 4.5 % 4.7 %
Restructuring expenses 0.0 % (0.1 %)
Strategic alternatives expenses 0.0 % 0.4 %
Other operating (income) expenses, net (0.9 %) 0.1 %
Income from operations 5.8 % 5.3 %
 
Interest expense, net 0.8 % 0.7 %
Income before income taxes 5.0 % 4.6 %
Provision for income taxes 2.0 % 1.8 %
Net income 3.0 % 2.8 %
 
(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)
   
 
26 weeks ended Increase/
(in thousands) (Decrease)
June 28, July 3, 2012
2011 2012 vs. 2011
 
Revenues:
Company-owned restaurant sales $ 183,412 $ 189,846 3.5%
Manufacturing and commissary revenues 16,774 15,689 (6.5%)
Franchise and license related revenues 4,736 5,331 12.6%
Total revenues 204,922 210,866 2.9%
 
Cost of sales (exclusive of depreciation and amortization shown separately below):
Company-owned restaurant costs
Cost of goods sold 54,278 53,372 (1.7%)
Labor costs 54,186 55,076 1.6%
Rent and related expenses 20,278 20,747 2.3%
Other operating costs 19,341 19,503 0.8%
Marketing costs 6,226 5,990 (3.8%)
Total company-owned restaurant costs 154,309 154,688 0.2%
 
Manufacturing and commissary costs 14,449 12,477 (13.6%)
Total cost of sales 168,758 167,165 (0.9%)
 
Gross margin:
Company-owned restaurant 29,103 35,158 20.8%
Manufacturing and commissary 2,325 3,212 38.2%
Franchise and license 4,736 5,331 12.6%
Total gross margin 36,164 43,701 20.8%
 
Operating expenses:
General and administrative expenses 18,705 21,115 12.9%
Depreciation and amortization 9,147 9,778 6.9%
Restructuring expenses 213 480 125.4%
Strategic alternatives expenses - 435 **
Other operating (income) expenses, net (823) 259 (131.5%)
Income from operations 8,922 11,634 30.4%
 
Interest expense, net 1,733 1,578 (8.9%)
Income before income taxes 7,189 10,056 39.9%
Provision for income taxes 2,941 3,896 32.5%
Net income $ 4,248 $ 6,160 45.0%
 
Net income – Basic $ 0.26 $ 0.36 38.5%
Net income – Diluted $ 0.25 $ 0.36 44.0%
Cash dividends declared per common share $ 0.125 $ 0.250 100.0%
 
Weighted average number of common shares outstanding:
Basic 16,555,617 16,892,986 2.0%
Diluted 16,847,493 17,162,952 1.9%
 
** Not meaningful

EINSTEIN NOAH RESTAURANT GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except earnings per share and related share information)

(unaudited)

 
  26 weeks ended
(percent of total revenue)
June 28,   July 3,
2011 2012
 
Revenues:
Company-owned restaurant sales 89.5 % 90.0 %
Manufacturing and commissary revenues 8.2 % 7.5 %
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 29.6 % 28.1 %
Labor costs 29.5 % 29.0 %
Rent and related expenses 11.1 % 10.8 %
Other operating costs 10.5 % 10.3 %
Marketing costs 3.4 % 3.2 %
Total company-owned restaurant costs 84.1 % 81.5 %
 
Manufacturing and commissary costs (2) 86.1 % 79.5 %
Total cost of sales 82.4 % 79.3 %
 
Gross margin:
Company-owned restaurant 15.9 % 18.5 %
Manufacturing and commissary 13.9 % 20.5 %
Franchise and license 100.0 % 100.0 %
Total gross margin 17.6 % 20.7 %
 
Operating expenses:
General and administrative expenses 9.1 % 10.0 %
Depreciation and amortization 4.5 % 4.6 %
Restructuring expenses 0.1 % 0.2 %
Strategic alternatives expenses 0.0 % 0.2 %
Other operating (income) expenses, net (0.4 %) 0.1 %
Income from operations 4.3 % 5.6 %
 
Interest expense, net 0.8 % 0.8 %
Income before income taxes 3.5 % 4.8 %
Provision for income taxes 1.4 % 1.9 %
Net income 2.1 % 2.9 %
 

(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 July 3, 2012
Cash and cash equivalents, end of period $ 8,652 $ 14,651
Property, plant and equipment, net 59,017 56,192
Total assets 204,732 206,059
Total debt 74,200 70,450
Total liabilities 116,919 114,335
 
 
 
26 weeks ended
Selected Consolidated Cash Flow Information: June 28, 2011 July 3, 2012
Net cash provided by operating activities $ 16,450 $ 23,897
Net cash used in investing activities (7,127 ) (10,665 )
Net cash used in financing activities (11,131 ) (7,233 )
Free cash flow (cash provided by operating

activities less cash used in investing activities)

9,323 13,232
Reconciliation of GAAP to Non-GAAP Measures:   13 weeks ended   26 weeks ended
  June 28,   July 3, June 28,   July 3,
2011   2012   2011 2012
 
Net income $ 3,080 $ 2,956 $ 4,248 $ 6,160
Adjustments to net income:
Interest expense, net 823 778

 

1,733

 

1,578
Provision for income taxes 2,130 1,856

 

2,941

 

3,896
Depreciation and amortization 4,607 5,011

 

9,147

 

9,778
Restructuring expenses - (74 )

 

213

 

480
Strategic alternatives expenses - 435

 

-

 

435
Other operating (income) expense, net   (936 )   75     (823 )   259
 
Adjusted EBITDA $ 9,704   $ 11,037   $ 17,459   $ 22,586

EINSTEIN NOAH RESTAURANT GROUP, INC.

SELECTED FINANCIAL INFORMATION

 
13 weeks ended July 3, 2012
Company      
Owned Franchised Licensed Total
Consolidated Total
Total beginning balance 447 91 239 777
Opened restaurants 1 5 4 10
Closed restaurants - (1 ) (3 ) (4 )
Refranchising, Net - -   -   -  
Total ending balance 448 95   240   783  
  Trailing 12 Months Activity
Company      
Owned Franchised Licensed Total
Consolidated Total
Beginning balance June 28, 2011 432

 

93 211 736
Opened restaurants 9

 

11 40 60
Closed restaurants (1 )

 

(1 ) (11 ) (13 )
Refranchising, Net 8  

 

(8 ) -   -  
Ending balance July 3, 2012 448  

 

95   240   783  




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